Shares of hydrogen fuel company Plug Power Inc (NASDAQ:PLUG) took a sharp turn higher on Friday after Amazon.com announced it was buying Whole Foods Market for $13.7 billion. Shares jumped as much as 11.2% in afternoon trading and were up 7.8% at 3:15 p.m. EDT.
The Amazon news is a big deal because Amazon a large customer of Plug Power and has warrants to purchase 55.3 million shares of stock. Whole Foods has more than 430 locations and if hydrogen powered forklifts made it into all of them, on top of the Amazon fulfillment centers, the deal could be end up being a growth driver for Plug Power.
What shouldn't be lost is that this is all speculation by the market. Even Amazon's deal to buy products from Plug Power may not end up being profitable, much less if Whole Foods joins the hydrogen revolution.
I think traders have gotten way out ahead of themselves looking for impacts of the Amazon/Whole Foods deal where they don't necessarily exist. In fact, Plug Power has to prove it can supply Amazon with product and still make money, something it hasn't ever been able to do. And if history is any guide, we can expect more losses in the future and stock sales to fund potential growth projects, which will end up losing money. Today's pop in Plug Power is wishful thinking and unless there's a real deal for investors to react to I don't think this pop will last long.
John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Whole Foods Market. The Motley Fool has a disclosure policy.