A short squeeze could be developing in shares of Plug Power (NASDAQ:PLUG) stock, the hydrogen energy company.
A negative call by a Truist analyst sent the stock down 10% on Oct. 2. Shares opened this morning at $6.72, a market capitalization of about $4.1 billion. So far in 2023, Plug Power is down 45%.
But that’s not all there is to the story. Short sellers have been piling into Plug Power. Fintel reports almost 25% of the float is being held short, including almost 60% of the float held off the exchange.
A short squeeze develops after speculators borrow stock, betting its price will fall. Buying can then force shorts to buy back the borrowed shares at higher prices.
Plug Power has been losing money as it scales the production of “green hydrogen,” which is hydrogen gas derived without burning fossil fuels. Hydrogen fuel cells combine hydrogen with oxygen to create energy and water. But Plug Power has had difficulty expanding the niche beyond utility backup systems (which usually don’t need hydrogen) and warehouse forklifts (not a huge market).
It’s a long-term play and not a guaranteed winner. Plug Power lost $236 million, 40 cents per share, in its most recent quarter, on revenue of $260 million, up from $151 million in 2022. Operating losses have been scaling along with revenue rather than narrowing.
The Truist call, with a price target of $8/share and a hold rating, has put selling pressure on the entire alternative energy complex. Rivals Bloom Energy (NYSE:BE) fell 8%, and FuelCell Energy (NASDAQ:FCEL) fell 6%.
Views of Plug Power on Stocktwits are registering extreme fear and high message volume. Bears noted the stock’s price peaked in early 2021 at $75 and predicted a freefall. The most recent press release from the company involves charges that it misstated its results in 2019 and 2020.
PLUG Stock: What Happens Next?
Traders see PLUG stock falling below $5 and are going short to take advantage. But if a lot of small investors buy the stock now, they could dash those dreams of profit.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.