plug power (NASDAQ: PLUG) The stock soared more than 10% in early trading Tuesday, hitting $3 a share, before giving up most of those gains to fall back to single-digit gains. Plug stock was still rising, but only up 2% as of 10:20 a.m. ET.
So why did Plug Power initially rise, and why did it give up those gains so quickly?
In a report released this morning, the investment bank Morgan Stanley Plug Power is expected to receive approval for a $1.7 billion loan from the Department of Energy this weekend, StreetInsider.com just reported. As analysts explained, the Biden administration may approve the loan before President Trump takes office to "reduce the risk that the loan may be called in."
Assuming Morgan Stanley is correct, Plug Power's stock price will surge once the loan approval becomes official.
So you should buy Plug Power stock, right? Well, not so fast.
If the loan is approved, it will undoubtedly be great news. But Morgan Stanley still doesn't think the stock is a "buy," and in fact reiterated its "underweight" rating (i.e., a "sell") on Plug stock and stuck to its $1.75 per share price target.
Why does MS do this? Because even $1.7 billion in government funding won't be enough to save Plug Power, according to bankers. Keep in mind that the company burned $1.8 billion in cash in 2023. It continues to burn cash through 2024 - about $892 million in the first three quarters, which translates into full-year 2024 free cash flow of about $1.2 billion.
Morgan Stanley believes that with less than $100 million in remaining cash and more than $900 million in debt it has accumulated, Plug Power must raise at least $500 million in cash this year by selling new shares.
With or without the loan, Plug Power stock is still worth selling.
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