Why Plug Power Stock fell 29.1% in the last month of 2021


What happened

Actions of Connect the power (NASDAQ: PLUG) fell 29.2% in December, according to data from S&P Global Market Intelligence. Concerns over the omicron coronavirus variant sparked massive sales earlier this month, and shares of the hydrogen fuel cell specialist continued to fall as investors assessed other risk factors.

PLUG given by YCharts

With conditions related to the ongoing pandemic creating potential headwinds and indications that the Federal Reserve will raise interest rates in 2022, the outlook for Plug Power has taken a hit. The company forged significant new partnerships in the middle of last month, but those consolidations were not enough to generate significant gains for its stock.

A Plug Power hydrogen delivery truck.

Image source: power plug.

So what

Plug Power issued a press release on December 14, 2021, announcing that it had reached an agreement to supply transport specialist Certarus with up to 10 tonnes of green hydrogen per day, with the first deliveries scheduled to begin in the first quarter of 2022. The company followed up on the news with a press release on December 15, 2021, announcing that it was teaming up with South Korean electric vehicle maker Edison Motors to develop fuel cell electric city buses.

While these releases signaled new applications and growing demand for plug power technologies, the market has become more focused on the emergence of a less favorable economic environment for the company and its actions. The Federal Reserve met on December 15, 2021 and announced it would cut stimulus measures in response to high levels of inflation. The Fed has also signaled that it could hike interest rates three times in 2022.

Now what

Rising interest rates have historically created less favorable environments for growth-dependent stocks, as the underlying companies often depend on debt to fund their operations. With rising rates, investors also tend to get better returns on bonds and loans, which means risky growth stocks lose their luster.

Plug Power has established itself as one of the early leaders in the green hydrogen energy 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 that the growth dependent valuation of the company opens the door to volatile trading.

Plug Power has a market capitalization of around $ 16.6 billion and is valued at around 18.5 times expected sales this year.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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