Plug Power (NASDAQ: PLUG) stock price has been in a strong freefall since May as concerns about its business continue. It has retreated to below $2.50 and is nearing the important support at $2.22, its lowest swing in January and May this year.
Concerns about Plug Power remain
Plug Power is one of the most high-risk and high-reward companies in the United States. It is a pioneer in the hydrogen energy industry and has substantial potential if demand continues rising as some analysts expect.
Plug Power has made costly progress in the past few years. It has already started selling hydrogen from its plants in Georgia and Tennessee while the Louisiana project is expected to come online soon.
The most recent results showed that its revenue in the first quarter came in at $120 million, with most of it being the sale of equipment and related infrastructure. This revenue figure was substantially lower than the $210 million it generated in the same quarter a year earlier.
Plug Power’s net loss also jumped sharply during the quarter, coming at $295 million, higher than the $206 million it made in Q1’23.
The biggest concern among investors is whether its hydrogen demand will continue growing in the coming years. As a result, analysts expect that the company’s revenue will be $922 million this year, a small increase from the $891 million it made a year earlier.
They also expect that its revenue will jump to over $1.38 billion in 2025. This growth explains why the Plug Power stock could generate strong rewards in the long term.
The other risk is that the company’s balance sheet is a bit strained. It ended the quarter with over $391 million in cash and investments. These are insufficient funds for a company that is burning over $200 million each quarter.
Fortunately, the company has reached a deal that will provide it with a $1.7 billion loan from the Department of Energy (DoE). Senator John Barrasso of Wyoming has sent a letter seeking for more details about these funds.
The $1.7 billion will help Plug Power avoid another dilutive cash raise as it has done in the past. Therefore, the stock has crashed as investors sell the fact since the news was being expected by most investors.
Plug Power stock price analysis
The daily chart shows that the PLUG share price has been in a strong free fall after the initial pop following its May earnings. This is in line with what I predicted. It has constantly remained below all moving averages while oscillators have continued to point downwards.
Most importantly, the stock is nearing the key support at $2.22, its lowest point in January and May. A break below that level will point to more downside since it will signal that bears have prevailed. If this happens, the stock will plunge to the next key support at $1.50.
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