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Why Plug Power Stock Sank Today

By Neha Chamaria – Sep 8, 2021 at 4:52PM

Key Points

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Investor optimism in the fuel cell stock is waning as rivals continue to grow.

What happened

Fuel-cell stock Plug Power (PLUG 0.38%) tanked on Wednesday, closing the day down 5.8%. Today's drop has only added to investors' frustration as they've watched the stock decline steadily in recent weeks.

So what

There was no news from Plug Power this morning, but the stock struggled to hold up amid the weakness in broader markets as rising delta variant coronavirus cases sparked fears of a slowdown in the economy. As it is, investors in Plug Power are becoming increasingly impatient in the absence of substantive progress in the company's business of late even as rivals continue to bag orders.

On Sept. 8, too, Ballard Power Systems' (BLDP 1.78%) subsidiary, Ballard Fuel Cell Systems, announced a partnership with industrials giant Eaton to develop fuel-cell technology for heavy-duty trucks. Just the previous day, Germany-based Quantron tied up with Ballard Power to use its fuel-cell modules in electric trucks scheduled for delivery later next year.

A worried person studying a falling stock price chart on a computer screen.

Image source: Getty Images.

Plug Power did bag two big partnerships earlier this year from SK group and Renault, but things have been pretty quiet since. Also, although shares of both Plug Power and Ballard Power tanked on Wednesday, Plug Power has hugely underperformed the latter in recent months.

Plug Power continues to burn cash rapidly and its losses are mounting -- it had accumulated losses to the tune of $2.1 billion as of June 30, 2021. And whatever cash balance the company is building is being sourced from sale of shares, not organically. Equity dilution is the last thing existing shareholders in a loss-making company want to see.

PLUG Chart

PLUG data by YCharts

Plug Power's foray into green hydrogen has failed to excite investors as well, as it could take years for the company to monetize any opportunities in the industry even as more and more players continue to enter the market.

Today's fall in Plug Power shares could also be a carryover from the previous day when Hyundai Motor's ambitious hydrogen fuel-cell plans sparked fears of rising competition in the fuel cell industry.

Now what

Profitability can typically be elusive for companies in growth industries like electric vehicles, but Plug Power has consistently overpromised and failed to deliver, which is why its stock can get hit hard and fast on days like today when weakness sweeps over the market.

Neha Chamaria 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
$15.81 (0.38%) $0.06
$31.02 (3.47%) $1.04
Eaton Plc Stock Quote
Eaton Plc
$163.31 (-0.03%) $0.05
Ballard Power Systems Stock Quote
Ballard Power Systems
$6.30 (1.78%) $0.11
$34.60 (15.33%) $4.60

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

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