Why Plug Power (PLUG) Is Falling

NEW YORK (TheStreet) -- Seems like the honeymoon for Plug Power (PLUG) might be over. After a couple days of rallies that saw Plug Power's stock rocket, Andrew Left of Citron Research has said that the fuel cell manufacturer's stock would be fairly valued at $0.50.

In the wake of such a weak valuation, Plug's stock -- which opened at $11.50 and continued gaining in early trading -- has come crashing back to earth down 34.65% and was trading at $6.69 at 3:12 p.m. EST.

Plug Power received a bump from CEO Andy Marsh's appearance on CNBC Friday touting his company's deal with Wal-Mart (WMT) to supply fuel cells for the retailer's fleet of forklifts. Marsh declared that Plug would turn a profit in 2014 after years of losing money.

"It's a casino stock," said Left, in the note published Tuesday, "the lowest form of speculative moonshot."

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TheStreet Ratings team rates PLUG POWER INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate PLUG POWER INC (PLUG) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electrical Equipment industry. The net income has significantly decreased by 54.0% when compared to the same quarter one year ago, falling from -$10.33 million to -$15.90 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Electrical Equipment industry and the overall market, PLUG POWER INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • PLUG, with its decline in revenue, slightly underperformed the industry average of 5.8%. Since the same quarter one year prior, revenues slightly dropped by 3.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • PLUG's debt-to-equity ratio of 0.85 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.21 is sturdy.
  • Net operating cash flow has slightly increased to -$7.01 million or 1.82% when compared to the same quarter last year. Despite an increase in cash flow, PLUG POWER INC's average is still marginally south of the industry average growth rate of 2.38%.
  • You can view the full analysis from the report here: PLUG Ratings Report
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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