Plug Power, FuelCell Energy shares run out of juice
Share prices of alternative energy plays Plug Power and FuelCell Energy took a tumble, after electric rallies over the past year.
Green euphoria mellowing
Share prices of clean-energy players Plug Power and FuelCell Energy both moved sharply lower late last week, following separate bearish research reports from JPMorgan.
At Friday’s (15 January) close, Plug Power slid 9.6% to US$60.14 a share, following a 4.3% drop on Thursday.
FuelCell shares finished Thursday (14 January) 8.1% lower, before slumping another 10% on Friday to US$15.84.
The investor mania over clean energy names in the past year had helped Plug Power and FuelCell record aggressive spikes in their share prices up till the middle of last week.
The skyrocketing stocks confounded some investors, as both firms were not yet profitable and analysts did not foresee them making money until at least 2022, Reuters reported.
Is PLUG powering down?
As of last Wednesday (13 January), PLUG shares more than doubled to US$69.50, from US$33.91 at end-2020. The counter climbed a dazzling 1,001% over the course of 2020.
The hydrogen fuel-cell manufacturer’s shares soared 21% last Tuesday (12 January) after it inked a joint venture (JV) with French carmaker Renault for hydrogen-powered light commercial vehicles in Europe.
A Germany-based trader thus pointed to Plug Power’s seemingly unreasonable valuation and said that the way the Renault JV news was being traded ‘is obviously completely wrong’, Reuters reported.
However, the stock rally halted when JPMorgan rated it ‘neutral’ with a US$60 price target.
JPMorgan cautioned that the shares were fully valued although still ‘a must own in the hydrogen space’.
If the company executes its growth strategy, revenue could surpass US$2 billion in 2025, which may justify ‘the very high multiples at which the stock trades’, JPMorgan added. The note triggered Thursday and Friday’s sell-off.
A week before the Renault announcement, South Korea’s SK Group also said it would take a 9.9% stake worth US$1.5 billion in Plug Power and form a JV targeting Asian markets.
Why is FuelCell also losing steam?
Meanwhile, FuelCell was downgraded to ‘underweight’ by JPMorgan last Thursday, from ‘neutral’.
The research team gave a US$10 price target, suggesting that the shares should be worth about half of its last closing price of US$19.14 at the time.
JPMorgan’s report came after FCEL shares clocked a nearly 800% gain in the past year. Since the start of 2021 until last Wednesday, the stock rose by a further 71%.
FuelCell shares were thus trading at a price-to-forward-sales ratio of about 50 times, making them ‘richly valued’ compared to the company’s peers, JPMorgan analyst Paul Coster wrote on Thursday.
Stock valuation aside, the analyst liked that the company’s technology could be versatile in industrial applications, and expected FuelCell to clinch a ‘breakout contract’ in the industrial, chemical or energy sector.
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