Plug Power: latest withdrawal represents buying opportunity, analyst says
TThe old axiom of “blood in the streets” could apply to Plug Power (PLUG) at present. Throughout February and March to date, the action’s rise has hit a brick wall; first in the context of the market pullback for the overvalued tech / growth / clean energy sector and, more specifically for PLUG, disappointing fourth quarter results. And this week, the shares of the hydrogen fuel cell maker faced another problem, following the revelation that the company will have to re-file its financial results for fiscal year 2018-19 along with a few recent statements. after an audit uncovered non-cash errors while the company was preparing. its 10-K deposit.
As Warren Buffett put it, investors should be “fearful when others are greedy and greedy when others are afraid,” and analyst B. Riley Christophe South seems to have taken a leaf from the billionaire’s playbook.
“Given that we believe this news does not alter the historical or future growth trajectory of the company,” said the 5-star analyst, “we believe this is another accounting noise that has created an additional purchase opportunity in inventory. “
PLUG’s auditor, KPMG, did not report any issues related to company malpractice and Souther attributes the errors to the company’s rental / PPA (power purchase agreement) activities, and mainly related to its transactions with Walmart.
PLUG was one of the first companies to adopt a sale-leaseback structure, and due to the very negative gross margins, the economics of PPAs have often raised concerns and questions among investors..
“Management made it clear that the early economics of the PPA on early projects were not impressive given the reliability of the product,” says Southern. “And we note that Walmart has openly discussed this at previous Plug Power Symposia to frame the dramatic improvement in quality. “
Souther also says it will be important to keep an eye on “the size and material nature of write-downs and potential write-downs,” although the analyst believes the economics of newer and future PPPs “will likely reflect the improvements. reduction in costs that we ‘have seen across the entire product segment.
Given that these first PPAs are recognized over a lifespan of 5 to 7 years, the segment has remained “an obstacle to profitability.. “
“To the extent that there is significant degradation on these early projects,” Southern summed up, “we are likely to see a much clearer picture of recent PPAs in the future after the degradation.”
Okay, but basically what does all this mean for investors? Souther maintains a buy on the PLUG shares, supported by a price target of $ 70. The figure implies gains of 90% over the next 12 months. (To look at Souther’s record, Click here)
Depending on the rest of the street, there are also a lot of advantages. The average price target stands at $ 58.54, which suggests that stocks will change hands for a 59% premium in a year. Analyst consensus rates this stock as a moderate buy, based on 10 buys, 2 takes and 1 sell. (See the analysis of PLUG shares on TipRanks)
To find great ideas for trading stocks at attractive valuations, visit TipRanks’ Best stocks to buy, a recently launched tool that brings together all the information about TipRanks shares.
Disclaimer: The opinions expressed in this article are solely those of the analyst presented. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.