Plug Power (NASDAQ: PLUG) stock price has stabilised this year as investors focus on the company’s turnaround strategy and its balance sheet strategies. After bottoming at $2.24 in January, the stock has surged by over 75% to the current $3.90.
PLUG is making progressTo be clear: Plug Power shares have a long path to full recovery since they remain much lower than their all-time high of $75. In other words, a $1,000 invested in the company at its peak is now worth about $50.
Plug Power has made some progress, which is a positive move. The most important one is that it has secured $1.6 billion from the Department of Energy (DOE), which is focused on renewable energy rollout. These funds mean that the company may not go bankrupt after all.
Further, Plug Power has made progress in its key plants. It has already started serving customers in its long-delayed plant in Georgia. It has also started supplying customers in its Tennessee plant.
At the same time, the company has embarked on a cost-cutting program as it seeks to save about $75 million in annual costs. It aims to reduce its cash burn by over 73% this year. As part of these measures, it has slowed investments in Texas and New York as it looks for investments. It has also announced layoffs.
Therefore, a combination of financing from the DoE, cost-cutting measures, revenue-generating activities, and price increases mean that the company will likely do well this year. Keep in mind that the company incinerated about $1.8 billion in 2023.
There is another bullish case for Plug Power in that it is in a pole position in the hydrogen energy industry. This is an industry that is expected to continue growing in the coming years as the US transitions.
However, there are still some substantial risks. While the company is expected to receive the DoE funds, it also has an ATM deal with B. Riley, which will likely see it sell stock to raise cash.
The other risk is that the company has a long track record of missing its own estimates. All its projects have had substantial delays while its 2023 revenue came in at $891 million, short of its estimated $1.4 billion. Also, there are signs that the electrolyzer market is seeing weak demand as its backlog slipped to 301,323 from 303,038.
Plug Power stock price forecast
I believe that Plug Power is not a good long-term investment until it solves the challenges described above. However, like Nikola, this is not to say that people should short the stock.
It is one of the most shorted companies in Wall Street, exposing it to a short squeeze now that the fear and greed index has moved to the extreme greed area.
Most importantly, as shown above, the stock has formed a falling wedge pattern, which is a popular bullish sign. This is important since the wedge is slowly nearing its confluence zone.
Therefore, the outlook for the PLUG stock price is mildly bullish, meaning that it could soon have a strong bullish breakout. If this happens, the next point to watch will be at $10.
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