Plug Power stock just flashed a warning sign: May 11 will be key

Plug Power stock price has recoiled in the past few days, moving from the year-to-date high of $3.45 to the current $3.13. This pullback has ended a relatively strong rally that pushed it from a low of $1.73 to the year-to-date high of $3.42.

Plug Power to publish its earnings on May 11

Plug Power, a giant player in the energy industry, has done well in the past three months. This rebound started on March 2nd when it published a fairly strong earnings report, which showed that its business was doing relatively well.

These numbers revealed that its revenue and margins continued rising in the final quarter of last year. Consequently, its annual revenue rose by nearly 13% to $710 million, helped by the sale of equipment, which made $371 million.

The fastest growing segment was its fuel deliveries to customers, which made $133.4 million. The power purchasing agreements rose to $107 million from the previous $77 million.

Notably, the revenue increase was accompanied by the ongoing weakness in the cost of revenue. Cost of revenue dropped to $951 million from the previous year’s high of $1.2 billion, and then previous year’s $1.4 billion. 

The net loss improved to $1.65 billion from the $2.1 billion it made in the previous year. This trend means that the company will turn a profit in the coming years.

The next important catalyst for the Plug Power stock price is the upcoming earnings, which will provide more information about its business. Analysts polled by Reuters expect the upcoming results to show that the revenue rose by 4.55% in the first quarter to $139.75 million.

The annual revenue is expected to come in at $800 million, up by 12.70% YoY. Its annual revenue will then surge to $946 million and over $1 billion in the next one. 

A potential catalyst for the company is that its business is the date center industry, which is seeing strong growth this year. It has already reached several important deals with companies like Stream Data Centers for its data center project.

Recent stock market performance suggests that demand for alternative energy sources is still high. A good example is the recent surge in SMR companies like Oklo and Nuscale. Also, Be Energy surged to a record high after inking a major deal with Oracle.

Still, the main risk that Plug Power faces is that its huge losses may push it to raise capital in the future, diluting its shareholders.

Plug Power stock price technical analysis 

PLUG chart | Source: TradingView

The daily timeframe chart reveals that the PLUG stock has pulled back in the past few days, moving from a high of $3.43 in April to the current $3.13. This consolidation is part of profit talking and as investors wait for the earnings.

The stock formed a golden cross pattern as the 200-day and 50-day Exponential Moving Average (EMA) crossed each other. 

However, the risk, is that the stock has formed a rising wedge pattern, which is made up of two ascending and converging trendlines. This pattern often leads to more downside, especially when they are nearing their confluence.

Therefore, the stock will likely retreat, potentially to $2.72 after releasing its earnings report. This is an important target as it was its highest point on January 22nd.