Plug Power shares extend losses premarket; Morgan Stanley slashes price target

Investing.com -- Plug Power (NASDAQ:PLUG) shares slipped in premarket U.S. trading, extending a steep loss posted on Friday, after Morgan Stanley slashed its share price target of the hydrogen fuel cell system developer in the wake of a going concern warning.

In a note to clients, analysts at Morgan Stanley lowered their price target to $3.50 from $9.00, saying that they "expect valuation pressure will remain until the company, at a minimum, improves its liquidity position."

They added that Latham, New York-based Plug needs to take "clear and decisive action" to improve gross margins, cut expenses, and reduce working capital needs in order to manage cash burn.

"[We] believe the next 3-4 months will be consequential in rebuilding investor confidence in the business model," the analysts wrote.

Plug raised doubts around its viability as a going concern in a filing last week, estimating that its "existing cash and available for sale and equity securities will not be sufficient to fund its operations" through the next 12 months. It would need to secure additional capital to stay in business, the Morgan Stanley analysts said.

The firm noted that it is attempting to navigate a "historically difficult" hydrogen supply environment in North America that has been severely constrained due to "multiple frequent force majeure events."

Shares slumped by more than 40% on Friday, and has now shed more than half of its market capitalization since the start of the year.