Plug Power Surge Will Face Real Test on March 13

Jacob Harper |

As trading concluded on Mar. 4 hydrogen fuel cell supplier Plug Power Inc. (PLUG) posted a gain of 12 percent on the day. The company had already gained 24 percent the day prior, and has now surged an astronomical 404 percent from its price three months ago. The question now is: can they continue, or is this run due to run out of juice?

Cause of the Run-Up

Plug Power has gotten a jolt from three sources: newfound profitability, projections, and analyst exuberance. On the first: Plug Power reversed a decades-long losing streak last quarter when they became profitable for the first time ever. This news began the surge that would continue to multiply as the year came to a close.

Two, Plug Power has scored some major deals as of late to outfit major retailers with fuel cells for electric trucks and/or forklifts. The first deal with FedEx (FDX) sent shares soaring, and another deal with Wal-Mart (WMT) in February further stoked investor excitement.

The kicker came on Mar. 3, when analysts Cowen and Co. gave a major vote of confidence by setting their price target for the stock at $5.50 and calling for more retail orders to come in. The bull vote from Cowen did a great deal to temper speculation that Plug Power was atop a bubble, and sent shares way up.

And perhaps they are. As of the end of trading on Mar. 4 Plug Power carried a short float of 18.04 percent, which isn’t outlandish, though certainly much higher than normal.  

Whether it is a bubble or just the beginning should come to light on Mar. 13, when the company reports earnings.

What Plug Power Needs to Do

Analyst consensus calls for Plug Power to not be profitable, and announce a loss of $0.08 a share. That’s better than the $0.22 a share loss in the year-ago period, but far from profitable. Revenue is expected to clock in at $7.4 million, up from $5.9 million a year prior.

Of course, beating estimates will keep Plug Power upright. But the company is already overvalued – the buillish Cowen and CO. report still has a price target 10 percent lower than their current price. So to continue the run they’ve had, Plug Power is going to need to accomplish two things.

Turning a profit would almost definitely give Plug Power a big push. But more than beating estimates by a wide margin, they really need to announce some major deals. FedEx and Wal-Mart are major scores, but to continue their run investors are going to need to see that bevy of orders from a variety of retailers that Cowen predicted come to fruition.

Plug Power closed out Mar 4 trading at $6.69 a share. They’re up 71.54 percent on the week alone.

Plug Power releases both fourth-quarter 2013 and fiscal year 2013 earnings right after the bell on Mar. 13.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
WMT Wal-Mart Stores Inc. 70.60 0.74 1.06 6,966,249
FDX FedEx Corporation 196.52 3.19 1.65 1,886,138
PLUG Plug Power Inc. 1.56 0.03 1.96 6,974,468
RGLXF RTL Group SA 70.00 0.00 0.00 0

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