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Why Plug Power Stock Is Still Going Down

By Rich Smith – Aug 24, 2020 at 12:56PM

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Citron says the stock can't earn a profit -- and Plug has yet to prove it wrong.

What happened

Shares of hydrogen gas producer and fuel cell pioneer Plug Power (PLUG -5.38%) are among the biggest winners on the Nasdaq over the past year -- up more than 500%. The stock's had a rough couple of days, though, falling 5.5% on Friday and another 6.7% (through 12:15 p.m. EDT) today.

I think you can blame Citron Research for that.

Man in suit stands atop a red arrow declining stock chart

Image source: Getty Images.

So what

Friday, if you recall, Citron put out a research report blasting Plug for having "never generated a profit" and being run by a CEO who "has sold 95%" of his own shares of the company.

Citron then proceeded to predict that Plug will miss its revenue targets this year (and not by a little -- by 40%) and said the stock, which sells for more than $12 today, is probably worth closer to $7 a share.

Now what

Plug stock sold off on Citron's report and, as there appears to be no new news on the wires that might affect the stock today, I can only conclude that investors who got spooked on Friday remain spooked today -- and for the same reason. Investors who have seen their stock quintuple in value over the past year are worried that the short-seller may be right and the stock is about to fall. They're selling to lock in their paper profits before that happens.

Lucky for Plug, there is something it can do to stop this sell-off: Deliver on its promises. Earn a profit, and prove the short-sellers wrong. Until Plug does that, though, the profitless stock will remain vulnerable to sell-offs like the one we're seeing today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Plug Power Stock Quote
Plug Power
PLUG
$14.96 (-5.38%) $0.85

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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