Plug Power's shares experienced a 10% surge in value early Tuesday morning.
Plug Power's shares experienced a 10% surge in value early Tuesday morning.
Plug Power's shares skyrocketed over 10% in the morning, reaching the $3 mark before halting its upward momentum. As of 10:20 AM ET, the stock is still climbing, albeit by a mere 2%. But you might be wondering, why the initial surge, and why did itreverse course so swiftly?
Good News for Plug Power
In a morning briefing, investment bank Morgan Stanley forecasted the Department of Energy (DOE) would approve Plug Power's $1.7 billion loan request before President Trump's inauguration. The Biden administration, according to Morgan Stanley, wants to secure the loan approval to minimize the risk of future recoupment[1].
If this prediction comes true, Plug Power will receive a significant financial boost that should positively impact its stock prices.
Pessimistic Outlook on Plug Power Stock
Despite this potential good news, however, Morgan Stanley didn't upgrade its rating on Plug Power's shares. Instead, it maintained its "underweight" recommendation and $1.75 target price. According to the bank, $1.7 billion in government funding alone won't be enough to address the company's financial woes.
Plug Power's cash burn has been intense, with the company depleting $1.8 billion and continuing to operate in the red in 2023. In 2024, Plug Power projected to burn an additional $1.2 billion in cash, bringing total cash burn to $3 billion from 2023 to 2024[1].
To survive, the company will need to raise at least $500 million through stock sales this year, as it currently has less than $100 million in cash and over $900 million in debt[1].
In essence, Morgan Stanley's optimism regarding Plug Power's loan approval prospects is tempered by its belief that the company's financial woes are far from over.
[1] Source: Enrichment Data.
Given the good news about Plug Power's loan approval, investors might consider increasing their investments in the company to capitalize on the anticipated financial boost. However, Morgan Stanley's cautionary tone suggests that while investing in Plug Power could yield potential returns, it's crucial to carefully consider the company's ongoing financial challenges and substantial cash burn.