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Why Plug Stock Popped Today

The Motley Fool logo The Motley Fool 1/11/2022 Rich Smith

What happened

A funny thing happened with Plug Power (NASDAQ: PLUG) stock today. This morning, analysts at investment megabank Citigroup cut their price target on the fuel cell leader, but instead of falling, Plug Power stock popped 2.7% (as of 10:20 a.m. ET).

Now why did that happen?

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So what

Arguing that Plug Power is actually a chemicals company rather than a renewable energy company, Citi observes in its note today that chemicals stocks rallied in 2021 (as TheFly.com reports).

On the one hand, this has Citi worried enough to cut its price target on Plug by 34%, to $37 per share. On the other hand, the analyst notes that historically, chemicals stocks tend to perform well in an era of high inflation and rising interest rates -- two factors that have been in the news a lot lately, and hurting other stocks.

Additionally, Citi argues that Plug Power stock in particular could perform well this year as the housing, electronics, and automotive industries revive and potentially create new uses for fuel cells.


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Now what

Whether or not you buy these arguments from Citigroup, one fact remains clear: Despite "cutting" its price target on Plug Power stock, Citi cut it only to $37. And with Plug Power shares selling for less than $25 today, that implies that Citi still sees about 50% upside in Plug stock this year.

Personally, I'm not convinced by that argument either. With Plug Power stock still unprofitable, and trading for a staggering 550-times-sales valuation, this stock looks like the farthest thing from bargain priced.

For today, however, I seem to be in the minority in that view.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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