After a huge increase of more than 60% last week, shares of Plug Power (NASDAQ:PLUG) opened Monday down more than 11%. But the stock recovered from the initial drop and were back to breakeven as of 11 a.m. EST.
After strong gains over the past three months -- accelerating through last week -- investors took some profits in the hydrogen fuel cell company early this morning.
But the news that's been driving the stock hasn't changed, and the initial dip didn't take much wind out of the sails before shares bounced back.
Several factors have been driving shares of the renewable energy company higher in recent months. Election results have investors moving into the sector expecting more federal focus and spending to continue developing hydrogen fuel cell technology and building out needed infrastructure.
Last week's strong gains were driven by an agreement with South Korea's SK Group. The strategic arrangement will give SK Group a 10% stake in Plug Power in exchange for a $1.5 billion investment. The partnership was created to "provide hydrogen fuel cell systems, hydrogen fueling stations, and electrolyzers to the Korean and broader Asian markets," the companies said in a statement.
Investors jumping on board should realize that the company has much further to grow to justify today's valuation. The stock is now trading at a price-to-sales ratio of more than 50, and Plug Power is not yet profitable.
The company and industry have potential to grow, but buyers should be sure to keep an investment in the speculative portion of a portfolio.