Four days after Plug Power (PLUG -4.31%) raised concerns about its ability to continue as a "going concern," shares of Plug and its hydrogen fuel cell rivals are experiencing significant gains in Tuesday morning trading. Bloom Energy stock is up 15.8%, Fuel Cell has gained 12.9%, and Ballard Power is up 10.4%. However, Plug Power itself is leading the pack with an astonishing 18.9% increase.
The surge in these fuel cell stocks is a fair response to Plug's recent poor performance. When Plug reported a Q3 loss of $0.47 per share, which was worse than expected and worse than the previous year, shares of Bloom, Fuel Cell, and Ballard were affected as well. Investors were concerned that the industry-wide supply challenges in the hydrogen network in North America, which Plug blamed for its losses, would also impact other hydrogen stocks.
Today, however, these stocks are benefiting from some positive news for Plug. Two major Wall Street banks have cut their price targets on Plug, suggesting that the sell-off in Plug stock may have been overdone. Although the price targets from Wells Fargo and UBS are lower than the current stock price, they imply potential upside for Plug Power stock and suggest that the other hydrogen stocks may have been sold off more than necessary.
Despite the recent rally in hydrogen companies' stock prices, it is important not to get too excited. UBS's note predicts significant underperformance in Plug's business in the coming years. They forecast a 17% sales miss in 2023, with sales of only $1 billion instead of the promised $1.2 billion. The forecast for 2024 is even worse, with UBS predicting only $2.25 billion in sales instead of the promised $3 billion, a 25% sales miss. In 2026, UBS forecasts $3 billion in sales instead of the promised $5 billion, a 38% sales miss.
While this bad news is specific to Plug, it is important to note that bad news for Plug can have a significant impact on other hydrogen stocks as well. As the bellwether for the hydrogen energy business, Plug's performance often sets the tone for the industry. Investors should proceed with caution.