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Wall Street JournalPlug Power Eyes Reducing Cash Burn Rate: Can It Be a Game Changer?
Plug Power PLUG has been grappling with a high cash burn rate and negative gross margins over the past several quarters. The company’s inability to turn a profit has required it to raise outside capital for funding its operations.
The company launched Project Quantum Leap in first-quarter 2025 to enhance its financial stability and move toward profitability. This strategic initiative involves several restructuring actions including workforce reductions, facility consolidation and refined product focus. The project targets to generate more than $200 million in annualized savings.
As part of the project, it expects to benefit from sales growth, pricing actions, inventory and capex management, and increased leverage of its hydrogen production platform. These efforts aided Plug Power to reduce net loss, improve the gross margin and lower operating cash outflow in the first quarter. It also helped PLUG to slow down its cash burn rate significantly in the quarter, which declined nearly 50% year over year.
Although the ongoing challenges, including negative gross margins and liquidity concerns, are likely to affect PLUG’s near-term performance, the Quantum Leap project is expected to boost its cash flow and reduce the cash burn rate in the quarters ahead.
Peers' Liquidity Profile
Among Plug Power’s major peers, FuelCell Energy, Inc. FCEL is a leading producer of stationary fuel cells and electrolysis platforms. FuelCell Energy exited second-quarter fiscal 2025 with cash and cash equivalents (unrestricted) of $116.1 million, much higher than the current portion of long-term debt of $17.1 million. In the first six months of fiscal 2025, FuelCell Energy used net cash of $75.6 million from operating activities, down 21% year over year.
PLUG’s another peer, Bloom Energy Corporation BE, provides solid-oxide fuel cell systems for on-site power generation. In first-quarter 2025, Bloom Energy’s cash and cash equivalents totaled $794.8 million, higher than $584.4 million of current liabilities. Bloom Energy used net cash of $110.7 million from operating activities, down 24.8% year over year.
The Zacks Rundown for PLUG
Plug Power’s shares have lost 28.2% in the year-to-date period against the industry’s growth of 12.6%.
Image Source: Zacks Investment Research
From a valuation standpoint, Plug Power is trading at a forward price-to-earnings ratio of a negative 3.31X against the industry average of 23.27X. PLUG carries a Value Score of F.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PLUG’s bottom line for 2025 has increased in the past 60 days.
Image Source: Zacks Investment Research
PLUG stock currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Plug Power, Inc. (PLUG): Free Stock Analysis Report
FuelCell Energy, Inc. (FCEL): Free Stock Analysis Report
Bloom Energy Corporation (BE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).