The stomach-churning, roller-coaster ride for Plug Power (NASDAQ:PLUG) continues this week, with the stock rebounding more than 15% today after crashing hard on an analyst's research report yesterday that called for the stock to implode entirely once the hype dies down.
On Tuesday's edition of "Stock of the Day", host Mark Reeth and Motley Fool analyst Simon Erickson discussed the incredible ride Plug Power has had so far. Simon tries to look through the exuberance and notes that while this is a disruptive new technology that has attracted some big-name clients so far, he still views it ultimately as a manufacturing company, which needs to pitch, manufacture, and ship each and every sale. While the market may be hoping for the next Tesla Motors with this stock as excitement over electric vehicles continues at a fever pitch, the price here may have become entirely disconnected from any reasonable valuation.
Simon also points to the fact that the share count has tripled in the past three years, prior to the stock's jaw-dropping 3,500% gain over the past year. Simon's pretty convinced that the capital-intensive nature of the business will mean more share dilution down the road, and says that with the company still in the negative on its gross margin line, he definitely doesn't like this stock today.
Mark Reeth has no position in any stocks mentioned. Simon Erickson has the following options: long January 2015 $7 puts on Plug Power. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.