If you're looking for a stock that ebbs and flows on every word from the CEO, and from posts on message boards and blogs, look no further, Plug Power (NASDAQ:PLUG) is a stock you should be watching. This is not for the faint of heart, the stock moves like the wind, but if you happen to catch it on the right side you might have a 20% or 30% return in a single day. Although this seems unrealistic if you are only now taking a look at this stock, think about this. A few short months ago this stock was worth pennies, and recently it traded over $10.
The rationale for such a move probably has a significant tie to what Tesla (NASDAQ:TSLA) has decided to do. Tesla has decided to manufacture batteries and everyone expects them to sell those batteries to other automobile manufacturers. Speculators are thinking that Plug Power could have an inroad to doing the same thing, but thus far this CEO has not revealed anything to that degree.
Certainly, the fuel cells produced by Plug Power are serving a purpose, but thus far the CEO has demonstrated that there is no intention to offer fuel cells to the automobile industry at this time. For speculators, the last part of that phrase is the important part. "Not at this time" might turn into "right now" if the right deal surfaces. The reason Plug Power has increased from pennies to over $10.00 this year is because speculators are expecting some sort of deal.
The interesting part is that this stock is trading on heavy volume, and hundreds of millions of dollars are changing hands every day. For a stock as speculative as this, that might surprise some people, but this stock used to look much better than it did a few months ago. In 2000, shortly after the company came public, the stock was trading at the equivalent of $1,400 a share, but in February of 2013 this stock was trading close to $0.15. Without any argument, investors in PLUG from back then had their head handed to them, unless of course they were lucky enough to buy when the stock was worth pennies.
The speculation that has been driving this stock recently has brought money to the table because the fuel cell industry is a very attractive space. There is a possibility that Plug Power could fill a gap, but there is nothing yet on the table or concrete enough for real investors to step up to the plate. Of course that can change, but right now the fundamentals do not warrant an investment in PLUG.
At current levels the stock is trading at 10x projected revenues, and EPS numbers are negative. Even when companies are growing very fast these lofty valuations raise tremendous red flags, but PLUG is not even growing. There may be an opportunity somewhere, at sometime in the future, and from the recent price action speculators are suggesting that will happen soon, but this stock is not sound on a fundamental basis as it stands today and it should be avoided by investors.
However, because the stock has been moving so rapidly, and because the liquidity is so excellent, shares of Plug Power can actually be a trader's dream. From its price on Thursday, March 27, 2014, Stock Traders Daily believes the stock has room to fall before buy signals surface again. According to our real time trading report for PLUG, the stock tested resistance recently and it is pulling back already. If the stock tests midterm support it can be bought with tight risk controls.
With that said, the only people who should be interested in PLUG at this time are fast money traders who use risk controls, because on a fundamental basis there is nothing that warrants an investment in PLUG at this time. Valuations are in the clouds, and speculators are hoping for something that management thus far is not delivering.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: By Thomas H. Kee Jr. for Stock Traders Daily and neither receives compensation from the publicly traded companies listed herein for writing this article.