Plug Power (NASDAQ:PLUG) shares continue to slide, after starting off the week by closing down 6.6% on Monday. This week’s performance hasn’t been Plug’s fault. On Monday, another big hydrogen company reported earnings that missed expectations. In an industry as small as hydrogen fuel cells, a miss by one company rattles investors and impacts other players. However, Monday’s news doesn’t explain the miserable performance of PLUG stock dating back to early February. Since closing at a decade-long high of $73.18 on Jan. 26, PLUG stock has plummeted. After its latest loss, it’s now down 67% from those highs.
Clearly something bigger is at play here. And given the support for zero-emission alternate energy sources like hydrogen fuel cells by President Joe Biden’s administration, PLUG stock is moving in the opposite direction you might expect.
Opening on May 6 at $23.17, are PLUG shares in “snap them up while they’re cheap” territory? Or is this a case of a company that soared too high in the excitement over green energy? The situation is actually a little complicated.
Accounting a Nightmare For PLUG Stock
There have been a number of issues directly related to Plug Power that have combined to help push down PLUG stock in recent months.
On Feb. 9, the company announced completion of a public stock offering at $65 per share. The move netted Plug Power over $2 billion in capital. That’s good in the sense that the cash will help the company pay for critical projects like accelerated expansion of its green hydrogen generation business. But the dilution had a negative effect on Plug’s share price.
Then in March, the company revealed that it had found accounting errors in its 2018 and 2019 results, plus the first three months of 2020. That disclosure set off another steep decline in PLUG stock. Accounting irregularities are seldom good news for investors. While Plug’s issues seem to be relatively minor, they did raise eyebrows. For example, Bloomberg reported analysts with Truist Securities wrote in a note to clients:
“Following these disclosures, we expect limited opportunity for outperformance in the near-term. While the company reiterated long-term targets and the accounting issues appear transitory in nature, we see limited upside until resolution.”
PLUG stock dropped 8% on the news.
A Slowing Green Rush?
In addition to Plug Power’s self-inflicted wounds, PLUG stock has also been adversely impacted by a sell-off of hydrogen stocks. Investors are concerned that the “green rush” is losing momentum, and that hydrogen stocks like PLUG have limited upside.
Bottom Line on PLUG Stock
Battery-powered consumer EVs get all the headlines, but behind the scenes, hydrogen fuel cells are doing the green heavy lifting for industrial applications. With turnkey solutions for applications like warehouse forklifts, Plug Power is a world leader. The company has 40,000 fuel cell systems deployed already. The need is there and the demand is there.
A challenge for investors is the need for patience. Because it’s dealing with commercial clients instead of consumers, Plug Power sales come one big deal at a time. The hydrogen sector and the company are well-positioned for long-term growth, but investors may have to wait for momentum to build again after Plug’s recent setbacks. Analysts are generally optimistic, though. The Wall Street Journal is tracking 19 investment analysts who cover Plug Power. They have a consensus overweight rating for PLUG stock, with an average $55.74 price target. PLUG also rates a “B” in Portfolio Grader.
If you do decide that PLUG stock is priced right for your portfolio, you might want to move quickly. The company is expected to report Q1 2021 earnings any day now. While the company whiffed on its Q4 earnings in January — resulting in a single-day loss of 12% for PLUG stock — it did raise its 2021 guidance. If the company reports a strong quarter, that could be the catalyst that kicks off a recovery phase for its stock.
On the date of publication, Louis Navellier had a long position in PLUG. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.