Plug Power (NASDAQ:PLUG) has been falling ever since an analyst downgrade. Specifically, Morgan Stanley analyst Andrew Percoco recently downgraded the hydrogen fuel cell systems innovator from an “overweight” to “equal weight” rating. The analyst also slashed his price target by more than 55%, dropping his PLUG stock price target from $35 to $15.
Plug Power has been trending downward since this downgrade, battling macroeconomic headwinds and volatile market conditions like many of its industry peers. This doesn’t mean that the former winner is destined to continue its race to the bottom, however. There’s reason to believe Plug will see progress again as markets gradually recover, although the road getting there may be slow.
Does this analyst downgrade mean it’s a bad time to bet on hydrogen stocks? Not necessarily. Let’s take a closer look at this company and why it may be destined for a turnaround.
What’s Happening With PLUG Stock?
Plug Power’s troubles didn’t start with Percoco’s downgrade. On the contrary, PLUG stock has been gradually declining all month, though it did see some slight gains late in March. As of this writing, shares are down more than 7% for the day. However, part of this could be attributed to general negative market momentum. Several of Plug’s peers — including Bloom Energy (NYSE:BE) and Linde (NYSE:LIN) — are trending downward as well.
PLUG stock did not immediately fall on April 3, when Percoco released his new rating and price prediction. But it quickly dipped when markets opened the following day. That may be because the analyst’s take did not contain dire predictions alone. As The Fly reports:
“The analyst continues to like the company’s strategy to vertically integrate the green hydrogen ecosystem. However, after several quarters of execution issues, the firm is “getting more cautious” on the pace of Plug’s revenue growth and margin improvement. It also sees potential near-term financing risks given the company’s continued elevated levels of cash burn.”
This is a fair assessment, given how PLUG stock has performed recently. The company hasn’t done much since the year began and it certainly isn’t without some risks. Still, investors should be careful not to disregard the positive elements that Plug Power brings to the table.
First and foremost, the company operates in an industry with significant growth potential. The hydrogen fuel cells market is expected to expand at a compound annual growth rate (CAGR) of 41% over the next four years, reaching $32.65 billion in 2027. That leaves plenty of room to run for companies making waves in the space. What’s more, as InvestorPlace contributor Ian Cooper recently noted, Plug already has deals with Walmart (NYSE:WMT), Amazon (NASDAQ:AMZN) and Home Depot (NYSE:HD), to name a few.
Other Experts Like PLUG Stock
This company also has technology that’s worth paying attention to. When he discussed the hydrogen sector’s potential for growth, InvestorPlace’s Luke Lango posed an important question: “Who is at the forefront of this multi-trillion-dollar disruption?” Ultimately, his answer is Plug Power. Lango says the company is “morphing into an all-in-one, vertically integrated powerhouse at the epicenter of the Hydrogen Economy.”
More recently, contributor Larry Ramer named PLUG stock as an undervalued growth play. Ramer says Plug has an opportunity to supply hydrogen in the aviation space, which could be another growth driver for the company.
Finally, although Percoco may have doubts, PLUG still enjoys a “moderate buy” consensus rating on TipRanks, based on 22 Wall Street analysts’ opinions. Of those analysts, 16 rate the stock as a “buy.”
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.