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Why Plug Power Stock Sank 29.1% in the Last Month of 2021

By Keith Noonan – Jan 4, 2022 at 4:00AM

Key Points

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After a dramatic pullback, the fuel cell stock is now down roughly 15% over the last year of trading.

What happened

Shares of Plug Power (PLUG 4.18%) sank 29.2% in December, according to data from S&P Global Market Intelligence. Concerns related to the omicron coronavirus variant prompted sell-offs early in the month, and the hydrogen fuel cell specialist's stock continued to fall as investors evaluated other risk factors. 

PLUG Chart

PLUG data by YCharts

With ongoing pandemic-related conditions creating potential headwinds and indications that the Federal Reserve would be raising interest rates in 2022, Plug Power's outlook took a hit. The company forged some significant new partnerships in the middle of last month, but these team-ups weren't enough to power significant gains for its stock.

A Plug Power hydrogen delivery truck.

Image source: Plug Power.

So what

Plug Power published a press release on Dec. 14, 2021, announcing that it had entered into an agreement to provide transportation specialist Certarus with up to 10 tons of green hydrogen per day, with initial deliveries slated to begin in the first quarter of 2022. The company followed this news up with a press release on Dec. 15, 2021, announcing that it was teaming up with South Korean EV manufacturer Edison Motors to develop fuel-cell-powered electric city buses.

While these press releases signaled new applications and rising demand for Plug Power's technologies, the market was more concentrated on the emergence of a less favorable economic backdrop for the company and its stock. The Federal Reserve met on Dec. 15, 2021, and announced that it would be cutting down on stimulus measures in response to high levels of inflation. The Fed also signaled that it could raise interest rates three times in 2022. 

Now what

Rising interest rates have historically created less favorable backdrops for growth-dependent stocks because the underlying companies often rely on debt to fund operations. With rates going up, investors also tend to get better returns on bonds and loans, and that means that risky growth stocks lose some of their luster. 

Plug Power has established itself as an early leader in the green hydrogen power market, and it could thrive if this industry continues to grow. However, investors should move forward with the understanding that this is a relatively young market that could see some big twists and turns, and the company's growth-dependent valuation opens the door for volatile trading. 

Plug Power has a market cap of roughly $16.6 billion and is valued at approximately 18.5 times this year's expected sales.

Keith Noonan 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.

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