Plug Power’s accounting errors don’t faze Wall Street

Plug Power Inc.’s accounting errors spooked investors on Wednesday but Wall Street remained sanguine for the most part, believing that the company’s accounting misstep will have no bearing on its bottom line.

Plug Power

shares fell more than 15% on Wednesday, on track for their lowest close since Jan. 6 and largest one-day percentage decline since June 11. The stock has lost a quarter of its price in a four-day losing streak.

The stock fell off a cliff late Tuesday after Plug Power disclosed it would have to restate financial statements for fiscal years 2018 and 2019 as well as some recent quarterly filings.

The errors were connected to the way Plug Power accounted for some lease and service agreements. Plug Power said that no misconduct had been detected, and the errors resulted in no cash impact.

Analyst Jeffrey Osborne at Cowen said the weakness represented a buying opportunity and the errors had been a “true” misstep and not an attempt to “cook the books.”

“While restating results is never a positive, the root cause of the restatement has nothing to do with future growth markets,” Osborne said in a note. It “was a true error in sale leaseback accounting reporting and not a nefarious event,” he said. Osborne kept his rating on the stock at the equivalent of buy.

Standards related to how companies dealt with lease and service transactions have changed over the years and other companies have had to restate financials, Colin Rusch at Oppenheimer said. Rusch also kept his rating on the stock at a buy equivalent.

“We would expect shares to trade off on the news and have a modest overhang until the issue is resolved,” Rusch said. “We remain constructive on PLUG’s growth, strategic position and the strength of its balance sheet to help facilitate growth.”

The company’s cash position and guidance on billings and margins are unchanged, said Neil Beveridge at Bernstein.

It will likely take a month to republish the accounts, he said. “Fundamentals of the business are unchanged however and we retain our (buy) rating on the on the stock,” he said.

The news prompted at least one downgrade, however.

Truist analyst Tristan Richardson cut his rating on the shares to hold from buy and slashed his price target by 35% to $42, from $65.

After the news there will likely be “limited opportunity for outperformance in the near term,” and “limited upside until resolution,” Richardson said in a note.

Plug Power shares have gained nearly 40% in the past three months through Tuesday and soared roughly 1,201% over the past 12 months, compared with gains of around 6.5% in the last three months and 56.7% in the past year for the S&P 500 index.

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