A green-powered siren song has gone the way of the horse and carriage. But unlike that predecessor and when it comes to Plug Power (NASDAQ:PLUG), it’s time to consider juicing up the portfolio with PLUG stock. Let’s look at what’s happening off and on the price chart, then offer a well-aligned, risk-adjusted way to go long shares without becoming another crash test dummy.
Nio (NYSE:NIO). ChargePoint Holdings (NYSE:CHPT). Arrival (NASDAQ:ARVL). If misery loves company, the green or alternative energy space has many investors commiserating with one another regardless of their vehicle of choice. You can count hydrogen fuel cell specialist PLUG among those ranks. The carnage, of course, hasn’t been without reason.
Following this past year’s spectacular run for non or less-reliant fossil fuel technologies, 2021 has taken a nasty turn from simple profit-taking into a more or less, sell-the-news bear market.
Federal Policy Impact
And today, no matter how many billions upon billions or perhaps trillions of greenbacks, if the Biden White House has its way, are thrown at EV and alt energy stocks, Wall Street isn’t interested right now. It is what it is.
For Plug Power’s part, the broader crash in alternative energy stocks, as well as a general risk-off market environment, has helped set PLUG shares back as much as 67% this past week from late January’s peak valuation of $75.49. But there’s also been specific stock-related drags working against Plug investors.
Whether investors inspect financial statements, a stock’s price chart or a combination of the two as the arbiter of truth, an earnings-driven “GAAP and gap” misstep off and on the price chart this past month hasn’t helped matters for PLUG shareholders. Bottom line, and even if you’re not buying what Wall Street is selling, word of revised accounting changes by management in today’s risk-averse setting has played a very real hand in PLUG stock’s unraveling.
Another weight on PLUG is the Biden administration’s still on-the-table $2 trillion infrastructure plan. The big spend project is widely seen as a way to further clean energy initiatives in the U.S. That sounds good on the surface. But competition from solar, wind, hydro and geothermal has investors fearing those green alternatives may take the bulk of the imminent awarded monies.
Taking Plug’s Good with the Bad
The good news is this past week Morgan Stanley resumed coverage of Plug Power with a price target of $35. That’s nearly $10 above the current market price in PLUG. The report also noted Plug’s strong balance sheet, good strategic partnerships and product advantages.
And the bad news? Despite the 12-month stock forecast for Plug Power, the best Morgan could muster up was a “hold” recommendation and a cut from the firm’s prior “buy” rating. Moreover, the banker stated PLUG’s current valuation is such that only limited upside potential exists.
The better news? In taking the good with the bad, investors are now approaching a spot where a nearly fully-charged PLUG stock could take shares back toward that limited but better-than-market opportunity of nearly 39% Morgan Stanley cautiously proffered.
PLUG Stock Weekly Price Chart
Source: Charts by TradingView
Unlike maligned peers Nikola (NASDAQ:NKLA), Hyliion Holdings (NYSE:HYLN) or QuantumScape (NYSE:QS), whose technologies have been battered by short-sellers, Plug is already the real deal in the alt energy space. Commercial hydrogen powered forklift customers from Amazon (NASDAQ:AMZN) to Walmart (NYSE:WMT) and a host of others are real world proof of Plug’s ability to help green the planet. And today, shares are close to greening investors’ portfolios, too.
Technically and at last week’s low PLUG stock came within 3% of zone support. From roughly $20 to $24, shares hold Plug’s 76% retracement level and prior uptrend support stemming from last year’s Covid-driven bottom. Close, but no cigar. Right? Not exactly.
Stocks, like people, aren’t perfect. And overall, Plug Power’s shares are at that point where they’re likely much closer to being an investable opportunity than the kind where asking too much likely means missing out on a great trade.
Watch the Chart
For now, I’d simply recommend waiting for the weekly chart to confirm a pattern candlestick bottom. That should be further backed by a bullish stochastics crossover signal.
This type of entry avoids catching a falling knife, but should still provide ample profit opportunity on the upside. Should those two technical events take place, slightly above, inside or even below our described support area, I’d then suggest an actively-managed, slightly out-of-the-money collar position as a favored vehicle for long exposure in PLUG stock.
No Stocks Owned: On the date of publication Chris Tyler and / or accounts under management do hold positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
