NEW YORK (TheStreet) -- The share price of Plug Power (PLUG - Get Report) is up an eye-popping 1,060% since Nov. 26. After the market close of Wednesday, the maker of fuel-cells packs for forklifts announced its purchase of ReliOn, a developer of hydrogen fuel cell stack, in an all-stock deal worth $4 million. Plug shares traded late Friday at $7.06.
What began with Plug's announcement in early December of its expectation to finally make a profit after 14 years of product development, aborted market directions and serial share dilutions, has morphed into a speculative fight between relentless momentum traders and a growing chorus of vocal shorts who anticipate an imminent bubble run-in with a pin.
At nearly 30-times sales, the stock trades at a price already discounting not only a full-year fiscal 2014 revenue guidance of $70 million but also a potential revenue-double for fiscal 2015, stemming, in part, from Wal-Mart's (WMT) anticipated order stream to outfit more of the mega-retailer's distribution centers.
In essence, investors who take a stake in Plug today are pricing in a two- or three-year flawless performance from Plug CEO Andy Marsh whose track record of forecasting anything remotely accurate has yet to be witnessed since as far back as 2010, as Andy Left's Citron Research aggressively asserts.As a result of three years of the alleged Marsh double-talk, some say the man is downright disingenuous, while others say that Marsh's string of guidance misses comes from a combination of unexpected technical defects in Plug's past products and a childlike streak of optimism along the way. However, today, investors have been assured that the company's new products are shown to be much more reliable, as Wal-Mart's follow-up order of 1,700 fuel-cell packs and related services implies that the most demanding of buyers is now satisfied with what it sees. Therefore, projected deliveries and revenue will, too, become more reliable (see Fourth Quarter Earnings Call), according to Marsh. Going forward, at $150 million of potential revenue from Wal-Mart, alone, according to private equity investor, Michael Bigger, Plug would then trade at 4.7 times sales at today's market cap. Contrast that valuation metric with another of Wall Street's long-runway-to-profitability stock, Amazon (AMZN), whose market cap of nearly 14 times revenue at the close of fiscal 1998 didn't frighten off investors for another nearly 100% move higher before crashing along with the Nasdaq in 2000. Though Plug is no Amazon, the comparative cult following of Plug appears to be similar at this time. And just as Amazon investors didn't see a bubble forming in 1997 to 1998, the longs don't see Plug as a bubble stock quite yet, either, not while Plug's tiny revenue merely scratches the surface of the estimated annual $36 billion material handling market -- a market size estimated by Bigger. Bigger also points out that the Tuggers, Transportation Refrigeration Units, Range Extenders and other niche markets fall under Plug's core competencies of off-road fuel-cell equipment, totaling an additional $25 billion-plus of potential annual revenue. In short, Plug has turned out to be one of the most enduring and controversial stocks of recent memory. Those who hate the stock, short it on any significant rally, which, in the case of PLUG at more than $7 per share, has attracted a lot of haters lately, with nearly half the float now sold short, according to Gurufocus.com. In the case of Plug, longs see a bucket of Andy Left's shorts fighting the tape and on the verge of a massive squeeze, while the shorts believe that it's only a matter of time when the longs wake up to the reality that Plug's recent rate of rise is unsustainable. As far as traders are concerned, profits come from timing a trade and not from investing with an enterprise's management. Even at the ridiculously high valuation of $790 million, if the longs can take PLUG higher still, the panic and capitulation from short covering could be quick and sharply higher, just as it was at times with Amazon between the years 1998 and 2000. At the time of publication the author held no positions in any of the stocks mentioned. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.