On Friday, UBS reaffirmed its Buy rating on Plug Power (NASDAQ:PLUG), following the recent developments at the company's Woodbine, Georgia production plant. The facility, which began operations last week, has successfully completed the first fill of a Plug tanker with liquid green hydrogen. The plant is equipped with eight 5-megawatt electrolyzers utilizing proton exchange membrane technology, capable of producing up to 15 tons of liquid green hydrogen per day.
Although the Georgia plant is not yet operating at full capacity, with expectations to reach the 15 tons per day mark within the next 3-4 weeks, this progress is a significant step for Plug Power. The company has been purchasing hydrogen from competitors at a cost of $11 per kilogram, leading to a nearly $6 per kilogram gross margin loss in its Fuels Delivered segment. The initiation of its own green hydrogen production is anticipated to reduce costs to $5 per kilogram, excluding the potential $3 per kilogram production tax credit ( PTC (NASDAQ:PTC)), thereby improving margins and reducing cash burn.
UBS estimates that running the Georgia plant at full capacity could save Plug Power approximately $32 million annually, based on the calculation of 15,000 kg per day at a $6 per kg savings over 365 days. Additionally, the Tennessee facility is expected to resume operations by mid-February, contributing an extra 10 tons per day of production capacity. Looking ahead, the Louisiana plant is the next major project, projected to add another 15 tons per day to the company's production capabilities, with plans to become operational in the latter part of the third quarter of 2024.
InvestingPro Insights
As Plug Power (NASDAQ:PLUG) takes significant strides with its green hydrogen production facilities, the financial landscape of the company draws interest among investors. UBS's Buy rating comes at a time when the company shows promising operational developments, yet InvestingPro Tips suggest a cautious approach to the stock due to several factors.
Notably, analysts are anticipating sales growth in the current year, which aligns with the operational milestones achieved at the Woodbine, Georgia plant. However, there is concern as Plug Power is quickly burning through cash, and 8 analysts have revised their earnings downwards for the upcoming period. Despite the potential for improved margins from the new production facilities, the company's financial health remains under scrutiny.
InvestingPro Data further illuminates the company's financial situation with a market capitalization of 2770M USD, a negative P/E ratio of -2.83, and a concerning gross profit margin of -32.84% for the last twelve months as of Q3 2023. The revenue growth of 38.49% over the same period is a positive sign, yet it's shadowed by the significant negative operating income margin of -99.9%.
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