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Have you ever experienced the awful feeling of seeing a highly respected analyst launch a tirade against one of your favorite companies? If you’ve owned shares of Plug Power (NASDAQ:PLUG), you might know exactly what I’m talking about as a market expert recently lambasted PLUG stock.
It’s like a one-two punch to the gut. First, you’ve got a prominent analyst making you think twice about owning the stock. On top of that, the analyst’s influence could create a self-fulfilling prophecy as people sell the shares based on his tirade.
And in the case of PLUG stock, it might feel as if the analyst is bashing a company that’s trying to promote a cleaner, better world. Can’t we all just get along?
Everyone is entitled to his or her opinion, and the skeptics have their place in the sphere of financial media. Nonetheless, PLUG stock doesn’t necessarily deserve the verbal beatdown it received at the hands (or keyboard) of a vitriol-filled commentator.
A Closer Look at PLUG Stock
This is a textbook example of how a single analyst can influence the price of a stock. Someone representing an analytic firm made a posting on Twitter (NYSE:TWTR) on Aug. 21. Also that day, the same firm released a strongly negative report on Plug Power.
The PLUG stock price tanked not only that day, but during the following trading day as well. After all was said and done, PLUG landed at $12 and change. Prior to this incident, the shares were moving towards the $14 resistance level.
Perhaps this was just a bump in the road as PLUG stock holders have enjoyed considerable gains in 2020. If you can believe it, PLUG started the year at a mere $3 and change.
The share price also dipped during the first few trading sessions of September. It will be interesting to find out whether that dip, like the others that have occurred in 2020, will precede a strong recovery.
Citron Gets Triggered
So, here’s how it went down. Citron Research’s tweet from Aug. 21 included two sentences worth of text along with a screenshot of a longer text.
It’s fair to say that Citron didn’t mince words in the firm’s comparison between Plug Power and Tesla (NASDAQ:TSLA). Indeed, I’ve read through a whole lot of analysts’ opinions and seldom witnessed anything this negative.
To give you the rundown, Citron forecast that PLUG stock would soon fall to $7. Citron also called Plug Power the “the Anti- Tesla [sic]” while projecting that the company “will miss revenue guidance by 40%.”
In case that didn’t get the message across, Citron further opined that Plug Power has a “real market cap” of $8.2 billion “based on fully diluted shares outstanding.” The firm moreover claimed that the company is/was “a never profitable business” and declared that PLUG stock “has become retail mania.”
A Rebuttal and a Defense
My first point of contention is that Plug Power and Tesla needn’t be compared at all. They sell two entirely different products. We’re talking apples and oranges here.
Second, the declaration that Plug Power hasn’t generated a profit isn’t exactly breaking news. This has been true for years but faithful investors are looking towards a (hopefully) profitable future for hydrogen-powered fuel cells.
As for the claim that Plug Power “will miss revenue guidance by 40%,” this assertion doesn’t line up with the majority of analysts. In fact, analysts who follow PLUG stock generally expect the company’s 2020 revenues to represent a nearly 35% improvement over last year’s revenues.
Moreover, investors don’t need to view a “real” market capitalization of $8.2 billion as a bad thing. The current market capitalization of PLUG stock, as far as I can tell, is between $4 billion and $5 billion. If Citron wants to pump the number up, I’m good with that.
The Bottom Line
It’s up to you to decide whether Plug Power is really a product of “retail mania,” to use Citron’s words. Despite that analyst’s dark interpretation, I see PLUG stock as a way to stake a claim in the future of hydrogen fuel cells and, more broadly, in the clean energy revolution.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.