“Stay alert,” says Truist about Plug Power stock

“He who takes up the sword will die by the sword,” is an often used saying. Plug-in power supply (NASDAQ:PLUG) One might conclude that the same principle could also be applied to public finance.

Plug Power recently received a financial lifeline from the U.S. Department of Energy’s (DOE) Loan Programs Office (LPO), which last month agreed to provide the hydrogen fuel solutions provider with a loan guarantee of up to $1.66 billion to help finance the development of up to six hydrogen production plants.

But that funding could be in jeopardy after U.S. Senator John Barrasso called for an investigation into the loan guarantee. The Wyoming Republican sent a letter to the Energy Department’s inspector general questioning a potential conflict of interest between the head of the LPO, Jigar Shah, and Plug Power.

For background, Shah, in his role at an infrastructure investment fund, was involved in providing a $100 million loan to PLUG in 2019. Although the debt was fully repaid in 2022, Barrasso is closely reviewing the current deal from the perspective of ensuring public trust and transparency.

While Truist analyst Jordan Levy views the move primarily as a political move, he still believes it is a worrying development for PLUG.

“We view the letter as largely political posturing and the fifth letter from Senator Barrasso regarding the LPO since October of last year. However, given the importance of the loan guarantee to PLUG’s overall growth strategy, we see the potential for subsequent investigation-related financing delays that could further jeopardize an already riskier investment proposition,” the analyst writes.

While the loan guarantee could be lifted, Levy is more concerned about any subsequent delays that could disrupt the financing timeline. Such a delay would pose a significant risk to investors, “given PLUG’s relatively uncertain financial position/high cash burn.”

The analyst also notes that the current election year has the potential to encourage increased partisan rhetoric on clean energy issues, so Levy will “closely monitor developments going forward, as the loan guarantee is critical to PLUG’s growth plans.”

Levy now rates PLUG shares a Hold (neutral) and has a $3.00 price target for the next 12 months. (To watch Levy’s track record, click here.)

On Wall Street, sentiment largely aligns with Levy’s cautious stance, with TipRanks’ analytics reflecting a consensus rating of “Hold.” Of 20 analysts tracked over the past three months, 6 are bullish on Plug stock, 10 remain neutral, and 4 are bearish. Still, the consensus price target of $4.70 suggests a potential gain of 62% over the next year. (See PLUG stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important that you conduct your own analysis before investing.