Craig-Hallum analyst Eric Stine cut Plug's target to $49, saying the need to restate financials is "never good"
Shares of Plug Power (PLUG) are under pressure on Wednesday after the company said it will restate its previously issued financial statements for fiscal years 2018 and 20219 and its quarterly filings for 2019 and 2020. Following the news, Truist analyst Tristan Richardson downgraded the stock to Hold as he expects limited opportunity for near-term outperformance after the disclosures. Still bullish on the name, both Cowen and Roth Capital kept Buy-equivalent ratings on Plug while arguing that the weakness in the shares provides a buying opportunity.
PLUG TO RESTATE FINANCIAL STATEMENTS: Plug Power announced that it will restate its previously issued financial statements for fiscal years 2018 and 2019 and its quarterly filings for 2019 and 2020, which will be disclosed in the Form 10-K for the year ended December 31, 2020. In consultation with KPMG, the company's independent registered public accounting firm, management and the Audit Committee of Plug Power's Board of Directors determined that the company's prior period financial statements need to be restated due to errors in accounting primarily related to several non-cash items, including the reported book value of right of use assets and related finance obligations; loss accruals for certain service contracts; the impairment of certain long-lived assets; and the classification of certain costs, resulting in a decrease in research and development expense and a corresponding increase in cost of revenue.
The revised accounting will change how the company accounts for certain transactions and items, but is not expected to impact the company's cash position, business operations or economics of commercial arrangements, Plug stated. The company added that it continues to expect to achieve its previously stated gross billings targets of $475M in 2021, $750M in 2022 and $1.7B in 2024.
MOVING TO THE SIDELINES: Truist analyst Tristan Richardson downgraded Plug Power to Hold from Buy with a price target of $42, down from $65, following the company's announcement of likely restatements and the disclosure of weakness in its internal controls. Richardson stated that while he has been generally constructive on Plug Power's fundamental outlook for the long-term, he expects limited opportunity for near-term outperformance following these disclosures. The analyst acknowledged that Plug reiterated long-term targets and the accounting issues appear transitory in nature. However, he sees limited upside until resolution, particularly amid a broader rerating in alternative energy-oriented equities.
'NEVER GOOD': Following the news, Craig-Hallum analyst Eric Stine lowered the firm's price target on Plug Power to $49 from $88 as he believes the need to restate financials is "never good" and the impact to shares of high multiple stocks such as Plug can be especially severe. Nonetheless, the analyst kept a Buy rating on the shares.
'MAJOR BUYING OPPORTUNITY': More bullish on Plug Power, Cowen analyst Jeffrey Osborne told investors that he views the pullback in the shares as "a unique buying opportunity," as the root cause of the company's restatement has "nothing to do with future growth markets." He also noted the restatement has no cash impact, which he reads to mean that "this was a true error in sale leaseback accounting reporting and not a nefarious event." He believes the restatement has to do with the complex accounting treatment of sales leaseback accounting of fuel cell units, hydrogen delivery and related equipment largely for Walmart (WMT) and sees no attempt to "cook the books." He keeps an Outperform rating and $75 price target on Plug Power shares.
Voicing a similar opinion, Roth Capital analyst Craig Irwin argued that Plug Power's accounting restatement creates "a major buying opportunity" on what seems like an auditor's change in approach for sale-leaseback accounting. The analyst has a Buy rating and $65 price target on the shares.
B. Riley Securities analyst Christopher Souther also views the selloff in shares of Plug Power as a buying opportunity. The news does not change the historical or future growth trajectory of Plug Power, Souther contended, adding that he believes this is "another piece of accounting noise that has created an additional buying opportunity in the stock." The analyst reiterated a Buy rating on the shares with a $70 price target.
PRICE ACTION: In morning trading, shares of Plug Power have dropped over 15% to $36.14.