Shares of fuel cell technology Plug Power (NASDAQ:PLUG) fell 5.9% in the morning session after an analyst at Susquehanna lowered the price target on the stock, compounding worries from a difficult previous week.
The stock’s decline continued a sharp downward trend from the previous week, when it fell more than 15%. Susquehanna cut its price target to $2.50 from $3.50, citing persistent uncertainty in the hydrogen market. This negative outlook overshadowed the company’s recent announcement of a major contract win in the United Kingdom.
Investors were also still processing a series of negative developments, including the company’s decision to suspend its activities related to a $1.66 billion Department of Energy (DOE) loan. This followed a pause on clean energy project funding by the new administration. Furthermore, Plug Power’s recent third-quarter results fell short of estimates, with the company reporting a 72% wider net loss compared to the previous year and a negative gross margin of nearly 68%.
The stock market overreacts to news, and big price drops can present good opportunties to buy high-quality stocks. Is now the time to buy Plug Power? Access our full analysis report here.
Plug Power’s shares are extremely volatile and have had 100 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock dropped 10.2% on the news that the broader U.S. stock market declined amid investor caution and a pullback in technology stocks.
The main story? Investors are cashing in on a good run and feeling a bit cautious. After a fantastic run, many of those high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a “market rotation.” Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced.
There’s a secondary reason for the cautious mood: The long government shutdown came to an end. Though it’s typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were “flying blind” without key updates on the economy’s health, like inflation data and the jobs report. In typical “sell the news” fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.
