Although investors knew that Donald Trump’s victory in the U.S. presidential election last year would spell trouble for wind and solar stocks, his win in November immediately sent most clean energy stocks down, regardless of the sector.
This included hydrogen fuel cell and electrosyler company Plug Power (PLUG), which saw its shares fall nearly 38% in November.
One of the reasons for the drop could also be because Plug happens to be an aggressively shorted stock, with roughly 40% of its shares sold short, as Barron’s notes. This short interest is massively higher than the average stock on the S&P 500, which sits at about 3%, according to data from FactSet.
But something interesting is happening with PLUG shares now: The stock posted gains for nine straight sessions. It has surged 50.6% over the past month and is now up 18.9% for the year.
All of this is happening despite the company not releasing any material updates that would drive its share price higher. And it’s not scheduled to report its Q3 earnings until November.
So what’s behind this rally?
The short answer: It’s hard to say.
But Sherwood News reported that nearly 30 million PLUG shares had changed hands during early morning trading on Tuesday, which could point to a short squeeze happening.
This means that a lot of retail short sellers were panicking as Plug’s extended rally continued, and they’re now looking to close their positions by buying back shares – which in turn sends Plug’s share price higher.
The company also disclosed in an SEC filing on Monday that hedge fund Heights Capital Management could resell up to 185 million shares of its common stock if it exercises warrants to receive them for $2 a share.
If Heights Capital decides to exercise all of its warrants, this would give Plug about $370 million in cash – and the company said it would use the proceeds “primarily for working capital and general corporate purposes,” which could include paying down some of the debt on its balance sheet.
Plug’s revenue could be ‘set to accelerate’
But even if there is no clear reason for Plug’s rally this month, Wall Street might be getting more bullish on its fundamentals.
On Monday, Craig-Hallum Capital Group analysts, led by Eric Stine, maintained its Buy rating and raised its price target to $4.00 from $2.00.
Stine noted that the firm traveled with Plug CFO Paul Middleton and VP of investor relations Roberto Friedlander for investor meetings in the Midwest last week, which he sees as the company “making a concerted effort to increase investor activity over the next few months with investor interest starting to ramp.”
“We believe that this is a result of the growing viewpoint of a favorable risk/reward with PLUG expressing that its business has reached an inflection point, contrasting with investor sentiment which we think still remains quite negative,” Stine wrote.
While investor sentiment may remain mostly negative, one of Craig-Hallum’s main takeaways is that “revenue is set to accelerate,” especially with its electrolyzer business.
The company noted in its Q2 earnings that revenue from its electrolyzer business tripled year-over-year (YoY) to $45 million the quarter. Meanwhile, its overall Q2 revenue of $174 million was a 21% increase YoY.
Stine attributed the boost in the firm’s price target to seeing “more share upside potential as progress is shown in key end markets and toward its financial objectives, and as investor sentiment improves (with further upside from the actual achievement of its financial goals)."
However, short sellers got some welcome news on Tuesday: Plug’s shares closed down 4.7%, snapping its nine-straight days of gains.
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