Plug Power Stock Up 3% in August – Time to Buy PLUG Stock?

The price of Plug Power shares has gone up more than 3% so far in August while the stock experienced a pronounced 9% uptick yesterday during a high-volume trading session a days after reporting mixed quarterly results.

During the second quarter of 2021, the company managed to bring $124.5 million in revenue for an 84% leap compared to the same period a year ago while also beating analysts’ estimates by 12% as per data from Seeking Alpha.

However, Plug Power reported wider-than-expected adjusted losses per share of $0.18 vs. analysts estimates of minus $0.07 for the period. These higher losses were primarily caused by a surprisingly high negative gross margin of 32.4% compared to a breakeven it had reported during the same period a year ago.

The company cited a multitude of factors to explain this deterioration in its profit margins including complications for sourcing hydrogen molecules, the termination of a relationship with a fuel vendor, and around $4 million in COVID-related expenditures.

The price action that followed the release of this earnings report was mixed as the sock initially jumped 10% but then settled 0.4% lower at $25.9 per share during a high-volume trading session where more than 33 million shares exchanged hands. Meanwhile, yesterday’s pronounced uptick has been followed by a 5% jump in the stock price this morning.

Could these latest volumes be an indication that PLUG stock is getting ready for a strong rebound? The following article takes a closer look at the latest price action to outline plausible scenarios after this earnings report.

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Plug Power Stock – Technical Analysis

Today’s uptick is pushing the price of Plug Power to a long-dated support/resistance area at $30.5 per share. This level has become a relevant indicator for both bullish and bearish swings in the stock price as the price has reacted quite negatively upon rejecting a climb above this threshold while shares have also gone up significantly when the price action manages to break above it.

The past two sessions have seen fairly elevated trading volumes that have exceeded the 10-day average by at least two times and they have occurred at a moment that the price is tagging the lower trend line shown in the chart above.

This kind of rebound often validates the relevance of the trend line and that could result in a short-term bullish outlook for the stock. However, those seeking to take a long position should wait until the $30.5 level is broken as this threshold is an important resistance to overcome if bulls are aiming to push PLUG higher.

Moving forward, if that resistance is broken, chances are that PLUG could jump to $40 per share as bears will probably capitulate. On the other hand, a rejection could lead to a pronounced downtick and possibly to the break of the trend line, in which case the downside risk will be quite sizable.

So far this year, the stock is down 14% but jumped to as much as $75 per share at some point in February during the short-squeezing frenzy that took place back then. Moreover, Finviz data shows that short float stands at 10.5% at the moment, with a total of 53.5 million shares being borrowed by traders who are betting against the stock.

Based on its average trading volumes, it could take short sellers around 3 to 4 days to fully cover their positions and that reduces the likelihood of a short squeeze at the moment.

Meanwhile, the firm’s disappointing negative profit margins and other fundamental factors may keep a lid on the stock price moving forward unless another coordinated effort from retail traders manages to push the price to new highs.

According to data from meme-stock tracking website Swaggy Stocks, comment volumes on WallStreetBets for Plug Power surged on the day that the company’s Q2 earnings report came out but the popularity of the issue has subsided since then and it is no longer a popular topic of conversation in the messaging board.

Plug Power Stock – Fundamental Analysis

Even though Plug Power had managed to grow its top-line results in the past, an adjustment in the company’s accounting practices led to a net loss of $596 million last year.

From 2016 to 2019, the company reported revenues of $586 million, which means that this adjustment has effectively wiped most of what the firm brought in previous years. Moreover, Plug Power has struggled for years to generate positive gross margins for years and that situation continues to cast doubts about the firm’s outlook.

By the end of the second quarter of 2021, the company had around $600 million in long-term debt on assets of $5.77 billion that included $3.16 billion in cash and equivalents and $1.24 billion in available-for-sale securities.

From a purely fundamental standpoint, even though the company’s technology might sound promising in theory, Plug Power remains an expensive bet on hydrogen at a market capitalization of $14.8 billion amid the firm’s unproven business model.

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