Why Plug Power, Molycorp, and Yingli Green Energy Tumbled Today

Stocks fell sharply on Tuesday, with the Dow falling triple digits and major market benchmarks losing around two-thirds of a percent. Positive economic data on housing and consumer confidence weren't enough to sustain gains for stocks, as investors instead worried about the pace at which markets have climbed in recent months. As much as the market's declines came as a surprise to bullish investors, they paled in comparison to the drops that Plug Power (NASDAQ: PLUG  ) , Molycorp (NYSE: MCP  ) , and Yingli Green Energy (NYSE: YGE  ) suffered today.


Source: Plug Power.

For Plug Power, which fell 7%, today's downward move reflect widespread negative sentiment with fuel-cell stocks in general, as peer Ballard Power Systems (NASDAQ: BLDP  ) also posted a 7% decline. Yet the pullbacks only represented partial profit-taking from last week's extensive gains for the fuel-cell sector, when a prominent analyst firm started coverage on Ballard with a buy rating. Plug Power and Ballard have both been extremely volatile in recent months, seeing sharp moves in both directions as sentiment shifts on a dime. Given how small both Ballard and Plug are, it's hard to link daily share-price moves to anything having to do with long-term fundamentals of the stocks, and so you can expect similar trading-related moves to continue well into the future.

Molycorp dropped 7% as the rare-earth metals producer continues to rise and fall with the prospects for what impact the Chinese could have on future available volumes by exporting its own supplies of metals. Figures announced yesterday showed that Chinese exports of rare earths jumped 34% in May from year-ago levels, continuing a strong of similar results throughout 2014 that have lifted volumes by 40% to 60% for rare-earth metals and associated products. Without a tighter export market from China, Molycorp loses one of its key competitive advantages because of the political stability of its supplies. Moreover, Molycorp's recent bond-rating downgrade shows that time might be running to avoid what could be another highly dilutive secondary stock offering to raise capital to restructure debt.

Source: Yingli Green Energy.

Yingli Green Energy also weighed in with a 7% decline. Recent events have greatly hampered Yingli's growth, with U.S. tariffs forcing Yingli customers to pay almost 27% higher prices than buyers outside the U.S. pay. In response, major customers have increasingly shifted to other suppliers or even sought to bring production capabilities in-house. Yingli still has plenty of opportunities in its domestic Chinese market, and the U.S. and China might be able to resolve trade differences eventually. In the short run, though, Yingli and some of its Chinese solar peers will continue to struggle.

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  • Report this Comment On June 25, 2014, at 3:12 PM, gmajesko wrote:

    MCP has real value in that it is the only domestic supplier of some crucial raw materials in manufacturing. PLUG on the other hand is a company which is already highly diluted, and will probably go bankrupt before its fuel cell technology is developed to the point where it is energy efficient. I commend the research effort but the value of the stock should be under $2 and investors should be prepared to hold for at least 5 years. Volatility on PLUG is based on emotion not technology or profits.

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