What happened
Many former high-flying alternative energy stocks have been on a downtrend in recent weeks. Shares of fuel cell companies Plug Power (PLUG 4.02%) and Bloom Energy (BE 5.47%) have dropped 40% and 22%, respectively, since the start of March. And the stock of solar power technology company Enphase Energy (ENPH 2.69%) is down 24% in that time.
That trend continues today, with the following share declines, as of 12:25 p.m. EDT:
- Plug Power down 8.6%.
- Bloom Energy down 10.6%.
- Enphase Energy down 6.1%.
So what
A general rotation out of the renewable energy sector began after many of these stocks outperformed most sectors last year. Returns in 2020 from these stocks ranged from more than 280% in Bloom Energy to 973% for Plug Power. But added uncertainty and profit taking accelerated when Plug Power announced earlier this month that it would need to restate three years' worth of financial results. The stocks' decline today seems to continue to reflect that sentiment, as there is no related company-specific news.
Image source: Getty Images.
Now what
Plug Power has announced a series of strategic international alliances since the start of the year. They include deals with South Korea's SK Group, which made a $1.6 billion investment for an almost 10% stake in Plug Power. The companies hope to expand fuel cell use in Asia. Other plans include growing renewable energy infrastructure in Western Europe, and integrating Plug's fuel cell technology for delivery vehicles in Europe.
But the potential growth has been overshadowed somewhat by uncertainty related to the news about its financial statements. Plug has delayed the release of its 2020 10-K annual report, and has received a compliance letter from the Nasdaq Stock Market.
Though the company says there won't be an impact to its balance sheet or business strategy due to the restatements, Plug Power isn't yet profitable, and even reported negative revenue due to accounting for customer warrant agreements last year. Bloom Energy is also yet to make a profit, and the company has only said that it expects cash flow from operations to be "approaching positive" in 2021.
Enphase Energy has been taking advantage of the growing residential and commercial solar markets, and is, in fact, profitable. It earned almost $134 million in the pandemic-impacted 2020 fiscal year. Enphase also put out some potentially positive news today on a strategic partnership to grow its solar technology business in South Africa.
But Enphase also trades at a forward price-to-earnings ratio of over 70, according to data by YCharts. At such a high valuation, it's getting caught up in the same market rotation that is affecting the unprofitable clean energy companies like Plug Power and Bloom Energy.
