Plug Power (PLUG) needs to focus on revenue growth and continued margin improvement to reach management's target of positive earnings before interest, taxes, depreciation and amortization in Q4, RBC Capital Markets said in a Monday note.

Although the company's Q1 gross margins were down sequentially as expected due to seasonal revenue patterns, they were up substantially year over year, RBC analysts said. Overall, the analysts said that Plug was trending "a bit ahead" of their expectations, as it continues to make incremental progress on margin improvement programs.

Plug's Q1 loss per diluted share narrowed on revenue of $163.5 million vs. $133.7 million a year earlier, the company reported Monday.

Plug's ability to convert its $8 billion sales pipeline remains "difficult to predict," the analysts said. On a positive note, management said it sees some upside potential due to the Middle East conflict heightening the need for energy independence and renewable energy adoption, according to the note.

RBC's rating on the company's stock is sector-perform with a price target of $2.75.

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