Plug Power stock slipped after the company published its financial results, which showed that its business was doing well. It dropped to $1.44, well below its year-to-date high of $4.34, and has formed a bearish flag pattern, which points to more downside over time.
Plug Power stock drops after earnings
Plug Power, a top player in the energy business, published a mixed earnings report, which showed that its revenue growth continued in the third quarter.
Its revenue jumped by 13% to $201 million, with its gross margin improving from minus 68% in the third quarter of last year to minus 3% today.
A look at its segment shows that sales of equipment and related infrastructure made over $105 million in revenue, up modestly from $96.7 million in the same period last year. This trend is important as the segment has been slowing down in the past few quarters.
The results also showed that fuel delivered to customers made over $38 million, while its services on fuel cells and power purchase agreements made $29 million and $27 million. All these businesses recorded modest growth from a year earlier.
The results also showed that its nine-month revenue rose to $524 million from $484 million last year, with all businesses having strong numbers.
Most importantly, the company turned a profit last quarter. It made $99 million in net income, a big turnaround from the $363 million it made last year. This profit, however, was not because its business improved. Instead, it was because of a change in the fair value of its convertible debt instruments, which stood at $108 million, and a change in fair value of warrant liabilities, which stood at $84 million.
Management and analysts expect growth to continue
The management expects that Plug Power’s business will continue doing well in the coming quarters as the turnaround efforts continue. It expects its annual revenue to grow by between 15% and 16%.
Plug Power also expects to have a positive EBITDAS in the fourth quarter, driven by its pipeline of projects, improved margins, and cost discipline. For example, its net cash usage has continued to fall in the past few quarters.
Wall Street analysts are also optimistic that the company’s revenue growth will continue in the near term. The average estimate among analysts is that the annual revenue will be $821 million, which is in line with what management expects. For next year, the growth is expected to accelerate to 19%, which will bring its annual figure to $978 million.
As a result, there are signs that Plug Power’s business is doing well across the board. The challenge, however, is that there is still a possibility that the company will seek to raise capital again. It ended the quarter with $134 million in cash and cash equivalents.
Plug Power stock technical analysis
The daily chart shows that the PLUG stock price has come under pressure despite the ongoing revenue growth. It has slipped from a high of $4.3 in June to the current $1.36.
There are signs that the stock has formed a bearish flag pattern, a continuation sign in technical analysis. This pattern is made up of a vertical line and a horizontal channel.
The stock has remained below the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bears remain in control.
Therefore, the stock will likely have a bearish breakout, potentially to the psychological level of $1. This view will be confirmed if it drops below the lower side of the flag pattern at $1.30.
In the long term, however, the stock will likely bounce back as investors buy the dip. Also, it is worth noting that it has a short interest of 20%, a sign that it will go through a short squeeze.
