Plug Power stock sinks even as turnaround story builds, short interest hits 27.4%

Plug Power stock extended its sharp sell-off this week, falling to its lowest level since April 2. The shares have plunged 45% from their highest level this year and have slipped below the 200-day moving average, while short interest remains elevated despite the company's ongoing turnaround efforts.

Rising short interest despite turnaround measures

Plug Power, a top player in the hydrogen energy industry, has been in a rollercoaster this year. It initially jumped to a multi-month high of $4.32 in May as investors cheered its turnaround efforts, and then erased most of those gains, and the situation is worsening. 

The ongoing sell-off has coincided with the rising short interest. Benzinga data shows that its short interest jumped to 27.4%, a sign that many investors still expect it to continue falling in the near future.

The company has made some major changes this year, with the management suggesting that it has a path towards profitability in the future. It has also made some customer wins in the past few months. For example, it secured a new 50 MW electrolyzer order from Australia, which is being developed by Orica, a top player in the mining and infrastructure solutions.

Before that, the company completed the commissioning of 5 MW electrolyzer system at Måde Power-to-X (PtX) facility in Esbjerg, Denmark. 

Plug Power’s financial statements have also demonstrated that its business was making progress. The results showed that its revenue jumped by 22% in the first quarter to $163 million, helped by its material handling and electrolyzer businesses. It attributed this growth to its relationship with Amazon and Walmart, which use its solutions in their warehouses.

Rising gross margins

At the same time, the company said that its gross margins improved to minus 13% from minus 55% in the same period last year, a 71% increase. It attributed the margin growth to its measures to improve service execution, sales growth, and fuel sourcing efficiencies.

Plug Power also noted that it had already deployed 320 MW of electrolyzer globally and that it had an $8 billion pipeline across sectors like industrial and energy. Also, its hydrogen fuel sales rose by 22%, helped by customer growth, higher prices, and reduced warrant charges. Its hydrogen fuel margin rose by 54%.

Wall Street analysts are optimistic about Plug Power, with the average estimate for this year’s annual revenue being $813 million, up by 14.5% YoY. Also, they expect the revenue to jump to $964 million next year.

Therefore, the stock is falling as investors focus on its balance sheet. It ended the quarter with $802 million in cash, with $223 million being unrestricted. The rest is in the form of restricted cash that will be released $50 million per quarter for the next few years. With its cash burn still continuing, chances are that it may raise cash again this year.

Plug Power stock price technical analysis

PLUG stock chart | Source: TradingView

The daily chart shows that the PLUG stock price has been in a strong downward trend in the past few weeks as the recent momentum stalled. It has dropped below the 50-day and 200-day Exponential Moving Averages (EMA).

The stock moved below the key support level of $2.66, its highest point in January this year. At the same time, the Relative Strength Index (RSI) has dropped and is approaching the oversold level of 30. 

Therefore the most likely scenario is that it continues falling as investors wait for more clarity about its business when it releases its earnings, possibly on August 10.