A disappointing earnings report sent Plug Power Inc. (Nasdaq: PLUG) stock as much as 9.5% lower today (Wednesday), as investors continue to take a more realistic view of the company's prospects.
The maker of hydrogen fuel cells, which reported its first-quarter results before the markets opened, said it had a loss of $0.06 per share, $0.01 more than analysts had expected.
Plug Power also reported a $68.4 million charge related to stock warrants. Including that one-time charge put Plug's loss at $0.57 a share.
Investors also weren't pleased that Plug's revenue fell 12.5% compared to the same period a year ago.
The poor earnings further dinged the already tarnished PLUG stock price, which has nosedived more than 60% since closing at $10.31 on March 10.
Plug Power is a classic case of a momentum stock that rocketed to startling heights only to crash and burn. One lesson investors can take from this saga is never to chase a momentum stock.
One year ago PLUG stock was trading at a mere $0.23 a share, and even as late as last December it was hovering around $0.80 a share.
Then the company started to attract attention by talking about expanding is fuel cell business from forklifts to other types of electric vehicles and by predicting profits in 2014. By the time Plug Power announced in February that it had made a deal to supply Wal-Mart Stores Inc. (NYSE: WMT) with more than 1,700 of its new GenDrive fuel cell units, PLUG stock was on fire.
Just from December to March, PLUG shot up some 1,200% and was up about 4,300% from where it had been just one year earlier.
The problem is, Plug Power's fundamentals never supported such a huge spike in the stock price, and it should have been obvious that momentum had a major role in driving the price higher.
The bubble burst when a blistering report from Citron Research just after PLUG shares hit their 52-week high threw cold water on the company.
"The recent volume and share price surge in Plug Power demonstrates how Wall Street treats this stock: nothing more than a casino," Citron said. PLUG promptly fell 41% and has continued to slide ever since.
And yet while Plug Power isn't the wunderkind investors thought early this year, it's not necessarily a train wreck, either.
The shame of all this is that, stock gyrations aside, Plug Power does have the potential to be a successful company.
Back in April, Plug Power acquired fuel-cell stack developer ReliOn with the intent of combining that company's technology with its own promising GenDrive technology. Dividends from that deal, however, won't be realized until 2015 at the earliest.
And the Wal-Mart deal will help as well.
In fact, there are signs that Plug Power's strategy has begun to work. Buried in today's earning report was the news that the company has already booked $80 million in new orders this year, more than twice what it did in all of 2013, thanks to its GenKey business.
And Plug Power Chief Executive Officer Andy Marsh said revenue for 2015 should rise to $135 million from $75 million this year.
Still, PLUG stock isn't a buy now, even with the price down to $3.82. The company needs to prove that it can execute, and, more importantly, that it can turn a profit. Plug Power has never had a profitable quarter in its history dating back to 1997.
PLUG is a stock to watch, though. If it finds more success with its GenKey business, and if we start to see some of the long-anticipated growth in the hydrogen fuel cell industry, Plug Power may yet prove to be a winner.
But that's too many "ifs" for the time being.
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