What happened
Aggressive growth stocks are having a mixed week. While shares of hydrogen fuel cell maker Plug Power (PLUG 7.21%) have surged by 11.5% from last Friday's closing price, two stocks in the electric vehicle (EV) sector were plummeting. Charging network company ChargePoint Holdings (CHPT 1.69%) and specialty EV maker Canoo (GOEV +15.38%) were lower by 17% and 19%, respectively, as of Friday morning, according to data provided by S&P Global Market Intelligence.
So what
It isn't overly surprising that ChargePoint shares dropped this week. Two aspects of an announcement the company made on Wednesday unnerved investors. ChargePoint announced it was raising additional capital by selling about $230 million in stock to institutional investors.
NYSE: CHPT
Key Data Points
Capital raises often push stocks down, especially when they are dilutive to existing shareholders. But the strongly negative reaction this week came because investors didn't think the company would need to do it. Especially when the stated goal was to "support [its] path to profitability in 2024."
As recently as Sept. 7 when ChargePoint reported its second-quarter fiscal 2024 results (for the quarterly period ended July 31, 2023), the company reiterated that it expected to reach profitability on an adjusted EBITDA basis by the end of next year. In fact, CEO Pasquale Romano stated that the company was "well-positioned and well-capitalized for the future" to reach that goal. It clearly hurts management's credibility in the eyes of stakeholders when just over one month later the company issues new equity to raise fresh capital.
On the other end of the spectrum this week, Plug Power announced plans for two new big supply contracts for its hydrogen-producing electrolyzer systems. Those deals likely helped give the company the confidence to boost its future sales outlook at the hydrogen symposium it hosted earlier this week.
Plug Power CEO Andy Marsh told investors at the symposium that the company is forecasting sales of $6 billion in 2027 and $20 billion in 2030. That's higher than the $5.5 billion analysts have been modeling for 2027. Estimated gross profit of $1.9 billion that year is also well ahead of what Wall Street is predicting.
NASDAQ: PLUG
Key Data Points
Now what
While it's encouraging to hear how Plug management thinks growth will accelerate, investors should still take those estimates with a grain of salt. The example of ChargePoint management saying the company was well capitalized, only to raise capital a month later, reinforces that point.
And this week's surge in Plug Power stock should also be put in perspective. Plug shares have still dropped by more than 30% over the last three months even with this week's jump. That's similar to how far start-up EV maker Canoo's shares have fallen in that time. While Canoo has also predicted a ramp-up in sales, it has yet to generate revenue with its specialty EV designs.
The takeaway for investors is that these stocks all remain very speculative. If one wants to invest believing in their futures, it should be done with a very manageable allocation that could conceivably be lost if things don't go as planned.
