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Why Plug Power's Stock Is Sinking on Monday

By Scott Levine – Aug 30, 2021 at 11:36AM

Key Points

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Is the company's growth in jeopardy, or is this much ado about nothing?

What happened

On a day when the Dow Jones Industrial Average and S&P 500 touched new highs, shares of Plug Power (PLUG 0.38%) headed in the other direction. As of 10:20 a.m. EDT today, the fuel cell specialist's stock was down 3.3%, having recovered slightly from its earlier decline of 4.3%.

It's not anything the company is reporting today that's scaring off investors, but rather news out of China and its apparent interest in the hydrogen economy.

China featured prominently on a globe.

Image source: Getty Images.

So what

Plug Power investors are responding to news today that China is making a multibillion-dollar investment in developing its hydrogen infrastructure. According to Reuters, China Petroleum & Chemical Corporation, or Sinopec (SNP 2.36%), plans to invest about $4.6 billion on expanding annual green hydrogen production capacity to 200,000 metric tons by 2025 for the transportation industry. Speaking about the company's new initiative, Ma Yongsheng, its president, said, "Sinopec will expand forcefully into making hydrogen from renewable energy, and zero in on hydrogen for transportation fuel and using green hydrogen for refining."

Investors are taking note today because Plug Power has articulated an interest in expanding beyond manufacturing fuel cells and into green hydrogen production, targeting daily green hydrogen production of 500 tons by 2025 and 1,000 tons by 2028. Although Plug Power hasn't stated an interest in entering the Chinese market, it's possible that investors had anticipated the company would plan this at some point.

Other investors, however, may be less concerned about Plug Power's foray into the Chinese market and more concerned with what Sinopec's announcement represents: major oil refiners' growing interest in hydrogen production. BP (BP -1.01%), for example, has expressed interest in green hydrogen production and is currently developing a project in Germany. Investors might be concerned that the oil refiners' rising interest in hydrogen will impede Plug Power from achieving its hydrogen production goals.

Now what

It's understandable why Plug Power investors are unhappy with the news out of China today, but it seems like it's an overreaction for investors to sell shares based on this development. The greater concern for shareholders should be the company's fundamentals and not China's interest in expanding green hydrogen production capacity.

Scott Levine 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
$15.81 (0.38%) $0.06
BP Stock Quote
BP
BP
$35.36 (-1.01%) $0.36
China Petroleum & Chemical Stock Quote
China Petroleum & Chemical
SNP
$46.17 (2.36%) $1.06

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

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