Shares of Plug Power Inc. experienced a significant drop, marking their worst day in over nine years, following another underwhelming quarterly report. This led some analysts to reassess their optimistic views on the company, which specializes in developing hydrogen fuel cell systems as a replacement for traditional batteries in electric-powered equipment and vehicles.

RBC Capital analyst, Chris Dendrinos, noted in a report to clients that although management remains confident in executing a near-term liquidity transaction and envisions margin improvement until the next year, it is currently advisable to step back and await the completion of these proposed events. Dendrinos also suggested waiting for more substantial progress in reducing cash burn and enhancing margins.

As a result, Dendrinos downgraded his rating on Plug's stock (PLUG, -1.50%) to sector perform from its previous outperform status. Additionally, the price target was reduced from $12 to $5.

In premarket trading, Plug's stock experienced a substantial 37.4% loss, positioning it to open at its lowest price during regular-session hours since April 2020. Moreover, this decline would mark the most significant one-day performance drop since the 41.5% plunge observed on March 11, 2014.

Plug Power reported a third-quarter loss that exceeded expectations and revenue that fell short of forecasts, citing "unprecedented supply challenges." Remarkably, this marked the 13th consecutive quarter in which losses surpassed Wall Street's projections, according to FactSet.

Analyst Colin Rusch from Oppenheimer, who had maintained a bullish outlook on Plug's stock for the past three years, downgraded his rating to perform. Rusch emphasized that while Plug has various options to enhance its balance sheet and reduce working capital, the ramifications of limited hydrogen availability on equipment sell-through may take a few quarters to fully resolve.

A Challenging Road Ahead for Plug Power

Despite facing some significant challenges, analysts still hold hope for Plug Power, although they are hesitant to recommend owning the stock at this time.

Wall Street Holds Bullish Outlook

Out of the 31 analysts surveyed by FactSet, 17 maintain a bullish stance on Plug Power, while the remaining 14 remain neutral. This upbeat sentiment remains undeterred by the stock's year-to-date plummet of 52.1%, and its 2022 freefall of 56.2%. Remarkably, there are no bears in sight.

Comparatively, the S&P 500 index has enjoyed a notable 13.2% rally this year.

Target Price Indicates Tripling Potential

The average price target for Plug Power has dropped to $12.60 from its previous value of $14.73. However, this lower figure still implies a more than three-fold increase in price.

Green Hydrogen's Promising Prospects

Amidst the downgrades, James West, an analyst from Evercore ISI, maintains his outperform rating on Plug Power's stock. Although he has revised his target price down by 32%, his new target of $25 is still nearly seven times higher than the current trading price.

West asserts that the green hydrogen economic landscape is on the brink of becoming a reality. He highlights positive government initiatives, such as the Inflation Reduction Act and the H2Hubs Program, as influential factors that will provide tailwinds for Plug Power.

Additionally, West anticipates that 2024 will be a pivotal year for the company. He expects significant expansion in margins as Plug Power scales up hydrogen production, reduces production costs, and starts monetizing renewable energy production tax credits.