Plug Power (NASDAQ: PLUG) stock price has staged a strong recovery in the past few days as investors went bargain hunting. After plunging to $3.23 in November, the stock has bounced back to $4.54. The stock remains over 90% below the highest point in 2022, giving it a market cap of over $2.75 billion.
Hydrogen energy challenges remainPlug Power is a leading company in the hydrogen energy industry. It offers an end-to-end green hydrogen ecosystem that provides diverse products in the sector. Its solutions are in the production, transportation, handling, and dispensing liquid hydrogen.
The company is a disruptor that aims to take hydrogen energy mainstream. As you’d expect, this is a complicated process since the hydrogen industry is still in its infancy. As a result, Plug Power has burnt through billions of dollars. According to its latest 10k, Plug Power has accumulated deficits of $3 billion over the years.
Plug Power’s losses have continued increasing this year. Its total net loss jumped to over $283 million, a big increase from the $170 million it made a year ago. These losses will likely continue now that the hydrogen market is still facing challenges that have constrained its volume. The report added that:
“More facilities caused significant hydrogen shortages impacting deployment schedules, fuel prices, shipping efficiencies, service on hydrogen infrastructures, and timing of varied reliability rollout programs.”
Plug Power faces more challenges ahead because of the vast investments needed to take hydrogen energy mainstream. The firm would be able to handle these issues if it had a strong balance sheet, which it lacks.
Plug Power’s cash and short-term investments dropped to $550 million in Q3, down from $1.084 billion in the previous quarter. Its cash balances fell from $2.69 billion in the same quarter in 2022. It also has $77 million in short-term debt and over $476 million in long-term debt.
Therefore, there is a likelihood that Plug Power will seek additional capital since it burned $400 million of free cash flow in the last quarter. A look at its outstanding shares shows that they have risen to over 605.3 million from 576 million in October 2021.
In this case, therefore, Plug Power will likely continue going through challenges in the coming months. Furthermore, the company has already issued a going concern statement, which gives investors a blurry vision of what to expect.
Plug Power stock price forecast
Turning to the daily chart, we see that the PLUG share price has been in a strong downtrend in the past few months. It formed a down gap recently after it published weak financial results. The company remains below the crucial support level at $7.36, its lowest point in May this year.
Additionally, it remains below the 50-day and 100-day Exponential Moving Averages (EMA). The Relative Strength Index (RSI) has also drifted upwards. Therefore, I believe that this recovery is a dead cat bounce, meaning that it will likely resume the downtrend in the coming weeks. If this happens, the shares will likely retest the YTD low of $3.23.
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