Plug Power stock forms a risky pattern as short-seller pressure builds

Plug Power stock has traded largely sideways in recent weeks, but remains firmly in bear-market territory after falling 47% from its May high. The shares were trading at $2.26, giving the company a market capitalization of roughly $3 billion, while short interest has climbed to 20% despite ongoing efforts to execute a turnaround.

Traders are still shorting Plug Power stock

American investors are still shorting Plug Power, the leading player in hydrogen energy, despite its ongoing turnaround efforts. Benzinga data shows that the short interest has jumped to 23.46%, while a separate report by Seeking Alpha shows that it has 20%.

The increased shorting is happening even as the company’s turnaround continues. Its last earnings report showed that its revenue rose modestly in the last quarter. It made $178 million in the second quarter from $173 million in the same period last year. 

The revenue increase brought its six-month revenue to $341 million from $307 million in the same period last year. This revenue is a demonstration that its business continues seeing strong demand from companies like Amazon and Walmart. 

Most of this growth was driven by its services performed on fuel cells, which soared to $29.8 million from the $16.3 million it made in the same period last year. This division made over $51 million in the first six months of the year.

Plug Power’s power purchase agreements made over $26 million, while the fuel delivered to customers hit over $39 million. This growth was offset by a significant decline in the sales of equipment, which dropped to $81.8 million. 

Most importantly, the company is working on boosting its profitability. Its net loss in the second quarter narrowed to $190 million mostly because of the change in fair value of convertible debt instruments. It also spent over $16 million in interest payments during the quarter. 

The short selling is, therefore, a sign that investors believe that the company will continue its dilution. Plug Power’s outstanding shares have soared to over 1.39 million billion from 1.12 million in the same period last year. The company had over 577 million in 2022. 

On the positive side, analysts believe that its revenue will continue to grow in the foreseeable future. Its annual revenue is expected to grow by 15.3% to $819 million, followed by $968 million next year. 

Plug Power stock price technical analysis

PLUG stock chart | Source: TradingView

The daily chart shows that the PLUG has remained inside a narrow range in the past few days. It was trading at $2.26, down sharply from a high of $4.31 in June this year.

The stock has formed an ascending channel, which is part of a bearish flag pattern. This pattern often leads to a bearish breakout. It has remained below the 50-day moving average, while the Percentage Price Oscillator (PPO) has moved below the neutral level.

Therefore, the stock will likely have a bearish breakout, potentially to the key support level of $1.87. A move below that level will point to more downside, potentially to $1.50.