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Wall Street darling Plug Power Inc. (Nasdaq: PLUG) gave investors even more cause for optimism by announcing yesterday (Wednesday) after the market close that it had acquired fuel-cell stack developer ReliOn Inc. for $4 million in stock.
The news sent Plug Power stock up 4.5% in after-hours trading yesterday, though the stock was only up about 1.5% in mid-day trading today (Thursday).
Of course, single-digit percentage gains for Latham, N.Y.-based Plug Power are peanuts. Shares of the fuel-cell maker are up 4,231% over the past 12 months and 389% so far in 2014. Currently priced at $7.59, the overheated stock has pulled back somewhat from highs in early March of more than $10.
Analysts said that using PLUG stock to make the acquisition was a smart move, as it takes advantage of the huge run-up in the share price.
Plug Power said that the ReliOn deal will generate about $1 million in losses this year, but will add to earnings in 2015.
Plug Power said it wanted to combine ReliOn's innovative fuel stack technology with its own GenDrive fuel cells, which can replace lead-acid batteries in electric lift trucks.
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But the acquisition will do more than just add to Plug Power's product line. ReliOn also brings 34 U.S. fuel cell patents to add to PLUG's 150 existing patents on fuel cell design, processing, and storage.
What's more, ReliOn has already installed more than 5,000 fuel cell stacks to such customers as telecoms, military installations, railroads, utilities, and off-grid markets – all of which will help Plug Power broaden its footprint in the market.
And those aren't the only reasons PLUG stock is soaring…
Other Catalysts for Plug Power (Nasdaq: PLUG) Stock
The dramatic rise in Plug Power stock over the past year is partly a result of growing investor interest in alternative energy technologies, but PLUG has also made several attention-grabbing deals.
For example, in January Plug Power announced a partnership with FedEx Corp. (NYSE: FDX) to develop hydrogen fuel cell extenders for 20 FedEx electric trucks.
And in February Plug Power signed a contract with the world's largest retailer, Wal-Mart Stores Inc. (NYSE: WMT), to buy 1,738 more of PLUG's signature GenDrive fuel cell units. Wal-Mart uses the product to run its electronic lift at six of its North American distribution centers.
If PLUG stock keeps rising, it may well get another strong push from a developing short squeeze. Some investors, probably noting Plug Power's lack of profits despite growing revenue, have bet on shares to fall.
Nearly a third of all PLUG shares are short right now. But the higher PLUG rises, the more the short-sellers go into the hole, and the more likely they are to "cover" by purchasing the stock to avoid further pain.
Plug Power is often compared to Tesla Motors as two stock winners in the alternative energy space. One trait they share is coming up with surprise after surprise that drives their share prices higher. Here's Tesla's latest surprise…
Plug Power Shares Up After Deal News
- Zacks Investment Research:
Plug Power Acquires ReliOn for Approx $4M
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.