Why Plug Power Inc. Shares Pulled Back

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Plug Power  (NASDAQ: PLUG  ) sank 2% on Friday after Roth downgraded the alternative energy technologist from buy to neutral.

So what: Along with the downgrade, analyst Philip Shen reiterated his price target of $8, exactly where the stock closed yesterday. While momentum traders might be attracted to the stock's big run in recent weeks, Shen's call suggests growing sentiment on Wall Street that Plug Power's valuation is a bit stretched at the moment.

Now what: According to Roth, Plug Power's risk/reward trade-off is pretty balanced at this point. "While we are encouraged by PLUG's production capacity of ~2,500 units per quarter, we believe infrastructure risk could put some shipments at risk of delay," said Shen. "Management indicated that ~25 percent of the 3k units of expected 2014 shipments are destined for sites with hydrogen infrastructure already in place. This leaves nearly 2,250 units (or 75 percent of expected 2014 shipments) subject to delay if infrastructure installs take longer than planned." When you couple those seemingly real risks with Plug Power's red-hot stock price, it's tough to disagree with Roth's cautious stance.

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