In a recent turn of events, Plug Power witnessed a 5.6% dip in Wednesday’s trading following Morgan Stanley’s decision to downgrade its rating to Underweight from Equal Weight.
The accompanying price target was revised to $3, down from $3.50. The downgrade is attributed to liquidity concerns and a dim outlook on hydrogen economics.
Plug Power, a key player in the green hydrogen sector, faces challenges that extend beyond operational issues. The company’s goals of commissioning green hydrogen plants and contributing to the evolving hydrogen landscape have encountered setbacks, leading to a reassessment of its financial standing.
Morgan Stanley analysts Arthur Sitbon and Andrew Percoco point to rising interest rates, increasing renewable electricity prices, and substantial capex inflation as factors influencing the economic viability of green hydrogen. The reliance on subsidies has become more pronounced, raising concerns about the visibility of subsidies and their impact on project pipelines and adoption rates.
Plug Power’s track record with its initial green hydrogen plants adds to the challenges. Delays in commissioning, cost overruns, and uncertainties surrounding the Inflation Reduction Act have created hurdles. The Georgia facility, for instance, is significantly behind schedule, and both Texas and New York plants have faced substantial delays due to a mix of regulatory uncertainties and construction issues.
Despite the concerns surrounding Plug Power, Morgan Stanley analysts maintain an Overweight rating on Bloom Energy (BE). The decision is underpinned by Bloom Energy’s strong underlying demand and the profitability of its fuel cell business, signaling a more optimistic outlook in the fuel cell sector.