Plug Power Stock Up 8% in October – Time to Buy PLUG Stock?

The price of Plug Power stock has surged over 8% so far in October following news that the company entered an agreement with South Korea’s SK Group to form a joint venture that seeks to promote the adoption of hydrogen as an alternative source of energy in Asia.

As part of the agreement, Plug Power announced in a press release published on 6 October that the joint venture will seek to build a gigafactory in South Korea to be completed in 2024.

The partnership has emerged around two years after the South Korean government set some ambitious goals for this energy source as part of its Hydrogen Economy Roadmap.

According to the statement, Plug Power will own 49% of the joint venture but it will retain an equal number of board seats than SK Group. All decisions concerning the joint venture must be unanimous to be passed.

Plug Power stock surged 6% on the day that followed the announcement while they have posted gains in the past four days as market participants seem to have embraced the news with excitement.

Can PLUG stock keep surging on the back of this positive development? In this article, I will dive into the price action and fundamentals of the company to possibly answer that question.

67% of all retail investor accounts lose money when trading CFDs with this provider.

Plug Power Stock – Technical Analysis

In a previous article from August, we highlighted that the $30.5 per share level was an important resistance for Plug Power stock moving forward and that has been the case lately as the price action has failed to climb above that threshold despite the multiple bounces off the $23.5 support area.

Volumes in the past four green sessions have been near the 10-day average but have not crossed it. This shows that sentiment is positive but not to the extent that it indicates the beginning of a full-blown uptrend.

Same as we stated back in August, the price remains in consolidation and a bullish outlook may only be drafted if a break above the $30.5 level occurs. Both the Relative Strength Index (RSI) and the MACD validate this neutral outlook as none of them are sending a clear buy signal at the moment.

Moving forward, if a break above this resistance occurs, a first target for Plug Power stock might be set at $35.2 per share – the stock’s 200-day simple moving average. This would result in a handsome 13.5% return at an entry price of $31.

Plug Power Stock – Fundamental Analysis

Since Plug Power is still years away from seeing the proceeds from this partnership with SK Group, it would be hard to say that a material change in the firm’s financial outlook is the primary cause for this 6% single-day uptick.

For market participants, it is probably the fact that the company’s technology is being recognized and adopted by a company as large as the SK Group – the third largest conglomerate in the Asian country – what is moving the needle.

However, from a fundamental perspective, Plug Power remains a risky bet for long-term investors as the company has failed to produce positive top-line results for years. In fact, most of its revenues were wiped by recent accounting adjustments that led to negative revenues of $100 million and negative gross profits of $423.3 million in 2020.

By the end of the second quarter of 2021, the firm’s cash and equivalents expanded to $3.16 billion and Plug Power held another $1.24 billion in available for sale securities.

As a result, the company’s tangible book value per share has climbed to $8.3 per share representing nearly a third of the firm’s stock price. This means that Plug Power’s technology is being valued at around $10 billion.

As a top participant in a market that is forecasted to be worth around $52.7 billion by 2027, Plug Power’s technology seems either fairly valued or a bit stretched. However, the fact that the company has been unable to produce positive top-line results despite its many years in the business is worrying.

Even though this latest deal with SK Group validates the company’s stand as a top competitor in the space, the company still has a lot to prove and nothing it has accomplished thus far justifies a valuation that accounts for around 25% of its total addressable market.

Buy PLUG Stock at eToro with 0% Commission Now!