It is no longer an “ongoing concern.”

Three months ago, Plug Power (NASDAQ:PLUG) issued a Form 10-Q raising “substantial doubt” about its “ability to continue as a going concern.” Is it possible that Plug Power has sufficiently resolved its problems in three months and is now in a position to recover?

This is a multi-billion dollar question and, as always, there is no definitive answer. Nonetheless, at least the market appears to be pleased with the reassuring words provided by Plug Power in its new quarterly report. However, it is debatable whether hydrogen fuel cell manufacturers are actually turning a corner.

Waiting for proof points

Before we look at Plug Power’s future, it’s important to understand how the company came to issue the dreaded “continuing concern” warning in the first place. From a mathematical standpoint, the potential bankruptcy expands to a net loss of $283.479 million in the third quarter, compared to $170.758 million in the year-ago quarter.

Moving from the quantitative to the qualitative, Plug Power acknowledged that it “experienced supply chain challenges related to hydrogen availability” in the third quarter of 2023. But Canaccord analyst George Gianarikas acknowledged in the report that “many of the companies he follows have experienced similar supply chain issues,” according to Barron’s.

Of course, this doesn’t mean Plug Power has an easy runway to recovery.

“Nonetheless, we await additional profitability proof points, operational stabilization and () additional guidance from the Treasury before becoming more positive on the stock,” Gianarikas said, halving his PLUG stock price target from $10 to $5. He said.

Plug Power can’t control what the U.S. Treasury does, but it may still have an opportunity to provide one or more “profitability proof points.” RBC Capital Markets analyst Chris Dendrinos didn’t sound particularly hopeful. According to Barron’s, Dendrinos estimated that Plug Power “may need more than $750 million more to increase liquidity over the next 12 months.”

The market doesn’t seem very hopeful either. Dendrinos lowered his price target on PLUG stock from $12 to $5, with the stock already down to $3.60 on the last day of February.

But on Wall Street, the winds of sentiment tend to shift suddenly, and sellers quickly became buyers on March 1, with Plug Power shares rising 10% that day. The question is whether investors have found a “proof point of profitability.”

Arguably, there were new financial reports to review. There must have been a positive somewhere, because even volatile assets like PLUG stocks don’t rise 10% without provocation.

No longer a ‘going concern’ but concerns still remain

In fact, there was enough justification for the one-day relief rally. In its most recent Form 10-K, Plug Power expressed confidence that its access to capital “will be sufficient to fund ongoing operations for at least 12 months following the issuance of the accompanying consolidated financial statements.”

As a result, Plug Power’s management now assures investors that “there are no longer any material doubts about the Company’s ability to continue as a going concern.”

In an accompanying press release, Plug Power reiterated this point, declaring that “there is no longer any material doubt about the Company’s ability to continue as a going concern.”

However, in this press release, Plug Power replaced the phrase “at least 12 months” with “The Company has determined that it has sufficient cash on hand with liquidity to fund ongoing operations for the foreseeable future.”

There’s no doubt this is something Plug Power’s downtrodden shareholders can pin their hopes on. At the same time, Plug Power failed to provide any real “profitability proof points” in its annual reports.

As it turns out, the fiscal year ended December 31, 2023 ended with Plug Power posting a net loss of $2.30 per share, compared to a loss of $1.25 per share in the previous fiscal year. Moreover, this result was worse than the analyst consensus estimate of a loss of $1.58 per share.

Meanwhile, Plug Power generated $891.34 million in revenue for the full fiscal year, compared to $701.44 million the previous year. But again, the mistake occurred when Wall Street required Plug Power to report annual revenue of $915.6 million.

Therefore, even if Plug Power resolves the ‘going concern’ issue for the time being, concerns still remain. The company had $822.2 million worth of working capital at the end of last year, and investors should monitor Plug Power’s spending as much as its revenue coming in in 2024.

This allows investors to wait and see if Plug Power can generate strong profits from sales of green hydrogen fuel cell storage systems for data centers this year. Very indirectly, Plug Power may also benefit from the artificial intelligence (AI) trend.

However, until more data indicates Plug Power’s actual “proving point of profitability,” it would be wise for prospective investors to wait and see what concerns (“progress” or otherwise) may arise in the coming quarters.

disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.