Plug Energy (NASDAQ: PLUG) inventory rocketed greater than 10% in early buying and selling Tuesday, hitting $3 per share earlier than giving again most of its good points and retreating to a single-digit acquire. As of 10:20 a.m. ET, Plug inventory remains to be up, however solely by 2%.
So why did Plug Energy go up within the first place, and why did it quit its good points so shortly?
In a word out this morning, funding financial institution Morgan Stanley predicted Plug Energy will obtain Division of Power approval for a $1.7 billion mortgage by the tip of this week, as StreetInsider.com simply reported. Because the analyst defined, the Biden administration is more likely to approve this mortgage forward of President Trump’s inauguration to “cut back the danger of potential claw-back of this mortgage.”
Assuming Morgan Stanley is true about that, Plug Energy is about to get an enormous bump in its inventory worth as soon as the mortgage approval turns into official.
So you can purchase Plug Energy inventory, proper? Properly, not so quick.
The mortgage approval shall be excellent news if it occurs, little doubt. However Morgan Stanley nonetheless would not suppose the inventory is a “purchase,” and actually reiterated its “underweight” score (i.e., “promote”) on Plug inventory, and caught with a $1.75-per-share goal worth on the shares.
And why did MS do that? As a result of in keeping with the banker, even $1.7 billion in authorities cash will not be sufficient to save lots of Plug Energy. Do not forget that the corporate burned by way of $1.8 billion in money in 2023. It continued burning money by way of 2024 — about $892 million within the first three quarters, implying about $1.2 billion in destructive free money movement for all of 2024.
With lower than $100 million in money remaining, and properly over $900 million in debt already amassed, Morgan Stanley thinks Plug Energy should increase at the least $500 million extra in money this yr, by way of sale of recent inventory.
Mortgage or no mortgage, Plug Energy inventory stays a promote.
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