Usually a stock is as volatile as
will rise in response to an optimistic call from a major broker. But shares of the hydrogen technology company fell despite a new Buy rating from Citigroup analyst PJ Juvekar.
Juvekar launched cover with a price target of $35, well above the current level. Two factors – one fundamental and the other less so – can play a role.
Make no mistake, Plug’s (ticker: PLUG) stock is volatile. At $26.63, the shares are down 65% from their January 52-week high of over $75 a share, but are up 277% from their July 2020 52-week of $7. 04 per share. The stock has fallen more than 20% in the past month.
Keeping Plug stock is an adventure. The stock lost 2.3% at close of trading on Friday. The
Dow Jones industrial average,
by comparison, they increased by 1% and 0.6%, respectively.
Citi’s enthusiasm cannot be attributed to weakness. Juvekar wrote in his report that the hydrogen economy is on the verge of an outbreak. Plug makes fuel cell technology that generates electricity from hydrogen gas. It also plans to make equipment that produces hydrogen by passing electricity through water.
Juvekar likes that vertically integrated strategy, making the fuel and equipment it uses, as well as the company’s balance sheet. Plug has approximately $4 billion in cash available to invest.
It’s a bullish call, but not an out-of-consensus. That is the first problem for the stock. Overall, 65% of analysts study Plug stock prices at Buy, while the average Buy rating ratio for stocks in the S&P is about 55%. And the average price target among analysts is more than $43 a share, ahead of Juvekar’s forecast.
The bottom line is that his assessment may not have made investors more optimistic than they already were.
The other problem for Plug’s stock could be that it’s a Friday, in the summer. Investors are not tuned in to the markets as they often are.
Plug stocks were on pace to trade about 13 million shares Friday, less than half the average volume of about 28 million shares in the second quarter. On a typical day, the trading volume would be no less than 50% of the spring average.
Low trading volume can lead to unexpected results from time to time. The stock may react Monday, when traders come back from the beach.
Write to Al Root at firstname.lastname@example.org