- Tesla and Plug Power have generated extraordinary gains after experiencing numerous inflection points.
- CNBC reporter’s recent comparison of Plug Power to Tesla requires a deeper look into the two companies.
- Plug Power CEO’s recent debut to the mainstream media served as the perfect bear trap and propelled shares more than 30% higher.
- The hype surrounding both emerging companies does not equate to an easy short position.
- Tesla and Plug Power are in hyper-growth mode.
Tesla (TSLA) and Plug Power (PLUG) go hand in hand in the eyes of the media, and after CNBC reporters mentioned the two alternative energy companies in the same sentence during Plug Power’s exclusive segment on Friday’s edition of Squawk on the Street, the floodgates were opened and shares of the fuel cell manufacturer buoyed to extraordinary multi-year highs. The trading volume behind Plug Power has been explosive, with more shares exchanging hands than are outstanding during Friday’s session. With more and more mainstream exposure being appointed to this resurrected fuel cell integrator and the industry in general, there are signs that this raging bull still has fuel in the tank.
A bear trap was in place for speculators after it was announced that Plug Power would be conducting a secondary offering with a single investor at $5.75 per share during the middle of last week. While many anticipated the stock to fall from its highs of $7.15 down to $5.75 levels (including me), the stock leaped higher from $6.50 after news broke that Plug Power’s CEO, Andy Marsh would be appearing on CNBC. Levels of $8.00 were broken shortly after the interview occurred.
The hype surrounding Plug Power continues to blossom, and with the company’s staggering one-year return hovering around 4800%, the rising question among traders and investors is how much juice is left in this beast?With Plug Power’s newly implemented (and profitable) business model, an impending Asian-based joint venture, and more contracts anticipated from approximately two dozen Fortune 500 customers, the possibility of shares breaching double-digits in the short term should not be ruled out, especially after breaking a multi-year resistance level on massive volume.
However, while shares of Plug Power have a strong chance of continuing theirrise throughout 2014, I advise caution to anyone purchasing shares of Plug Power at current levels, especially with a binary event such as earnings occurring on March 13th. At this point, only risk-seeking traders or extremely long-term oriented investors should be playing with Plug Power. A drop below $6.00 should be heavily exploited as a buying opportunity.
A staggering run-up, growing hype, and a compelling alternative energy product has the masses comparing Plug Power to Tesla Motors, and it makes sense. Both companies excite investors since generating sensational gains in a short period of time, and the futures for both look bright due to their competitive advantages, high barriers to entry, and virtually unlimited growth potential. Analysts and institutions have gotten behind both names, insiders of both companies are holding onto shares, and the growth potential has barely been scratched by these two budding green-focused businesses. A review of Tesla and its dramatic one-year stock rise may shed light on where Plug Power currently stands in its transition to a hyper-growth company, and how much more shares stand to gain as the world’s premier fuel cell integrator begins to deliver.
Tesla Motors: Rise to the Top
Tesla Motors is a start-up electric automobile producer based out of California that filed for an IPO seven years after inception in 2010, being the first American car producer to go public since Ford’s 1956 IPO. The hi-tech car company depends on lithium ion batteries to power its lineup of luxurious electric sports cars, and the company finally began to pick up traction among both customers and investors in 2013, thanks to a number of revamped car models and price points. The high-priced cars have been well-received by consumers who could afford them, and after blowing past Wall Street’s expectations in the beginning of 2013, Tesla has been off to the races.
The hype surrounding Tesla stemmed from improving fundamentals and rumors alike. From recording a profitable quarter for the first time since inception, to Apple buyout rumors, to a possible pairing with Google’s self-driving car technology, Tesla has been a news-driven stock for the past year, with visionary CEO, Elon Musk basking in the spotlight. Ever since the momentum and hype behind Tesla began to build in early 2013, the price action has resembled inertia: the bigger the force, the harder it is to take down.
With Tesla’s monstrous rise to an all-time high of more than $250, more and more shorts continue to fuel the fire lit under Tesla, and as the company explores more opportunities for growth, a positive news development can trigger another short squeeze, propelling Tesla to $275… and then $300 the next time… and then $325 thereafter, and so on and so forth.
Tesla is a hyper-growth story. The company’s production has more than doubled in a year’s time, and revenues jumped from $413 million in 2012 to more than $2 billion in 2013. The company’s well-received products are targeting a massive market but have yet to significantly exploit it, which serves as a testament to Tesla’s outstanding growth prospects (not including the recently announced gigafactory).
But when you put Tesla down on paper and begin to crunch even the simplest of numbers, it is easy to understand why there are so many critics that call Tesla’s current $30 billion valuation far out of whack (compared to ~$5 billion in 2012).