Plug Power (PLUG) stock price went parabolic on Thursday even after an influential short-seller warned that the company may go bankrupt. The PLUG share price was trading at $2.50, up by 50% from its lowest point this year. It remains down by almost 100% from its all-time high.
Balance sheet woes persist
Plug Power is an American company that aims to become the biggest player in the hydrogen energy industry. The company sells hydrogen fuel cells, proton exchange membrane, hydrogen liquefiers, and liquid hydrogen cryogenic solutions. Its most important business is hydrogen production.
Plug Power hopes to become the biggest hydrogen producer in the United States, thanks to its locations in Georgia and Louisiana. It sells this hydrogen to companies in the transportation industry, heavy industries, and retail and logistics.
Plug Power hopes that it will become the leader in hydrogen energy for vehicles, an industry that analysts expect will continue growing in the next few years.
The challenge, however, is that the hydrogen industry is a capital-intensive one, which explains why it has burnt through billions of dollars in the past few years.
Its net loss in the trailing twelve months stood at over $1.4 billion, a big increase from the $1.38 billion last year. Altogether, its annual losses have totalled over $3.6 billion in the last five years.
The company is now relying on a promised Department of Energy (DoE) loan to fund its balance sheet. In a recent statement, analysts at Hunterbrook Capital warned that the $1.7 billion cash may not arrived, especially now that Donald Trump is set to become the next president.
The most recent results showed that Plug Power’s balance sheet is not all that good. It ended the quarter with $93 million in cash and equivalents, a drop from $135 million in December last year. Its restricted cash stood at $216 million, while its inventory was $885 million.
These funds mean that the company hopes that it will receive the DoE financing as soon as possible since its losses are still enormous.
The most recent results showed that its net loss for the quarter was $211 million. Its loss for the nine months of the year rose to $769 million. Therefore, if this trend continues, or even if it makes marginal improvements as the management has promised, there are odds that it will need additional cash.
Plug Power has a long record of raising cash and diluting existing shareholders. For example, its total outstanding shares rose from 306 million in 2020 to almost 1 billion today, a trend that will continue. It recently raised $200 million by selling shares.
PLUG is also one of the most heavily shorted energy companies in the US. It has a short interest of 23%, meaning that many investors have shorted the company.
Plug Power stock price analysis
The daily chart shows that the PLUG share price has been in a tight range in the past few weeks. It has remained slightly above the key support at $1.56, its lowest point in September.
Plug Power has moved to $2.4, its highest level since November 5. At the same time, the Average True Range (ATR) has continued falling, a sign that the volatility has dropped.
PLUG has continued to consolidate at the 50-day and 100-day Exponential Moving Averages (EMA).
Therefore, the odds are skewed against the Plug Power stock as its costs continue rising. However, there is a likelihood that it will go through a short squeeze in the next few months. If this happens, the stock could jump to over $4 in 2025.
Read more: Plug Power stock is risky, but a short squeeze can’t be ruled out
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