Plug Power looks like the latest "cult stock" to want to join Tesla and Virgin Galactic
This is a smog-free zone... Upstate New York's Plug Power wants to be the "leader in powering electric motors" — but it's 23-years-old and definitely isn't that. It's taking a different approach than Tesla to clean electric motors: The Hydrogen Fuel Cell. Now it's getting major attention from investors in its 24th year.
- Battery electric: Drives ~250 miles on a charge. Great for most car owners, because 99% of drives are shorter than that. Charge the car overnight with your garage outlet.
- Fuel cell electric: For industrial vehicles (think forklifts, buses, delivery trucks), battery doesn't work as well because charging takes hours. And hours of not moving is big lost $$$. Fuel cell is as green as battery, but takes minutes to fill up instead of hours to charge up.
- For the chemistry fans (how Fuel Cell works): Hydrogen and Oxygen enter a fuel cell engine, then electricity, heat, and water go out.
But you've still never heard of Plug Power... Until this year. In January, the company announced a major order from one Fortune 100 company — the single order will generate nearly as much revenue ($172M) as Plug Power made in the entire past year ($191M). It also announced a new engine it's working on specially for delivery trucks. But its stock has risen over 150% in 5 months and 27% just last week... despite 2 decades of consistent unprofitability.
We have to talk about "cult stocks"... 3 stocks this year have enjoyed gigantic stock price jumps that can't really be explained by fundamentals or company news. Tesla and Virgin Galactic both hit the upper stratosphere of Wall Street recently, and elements of their inexplicable rise can be seen in Plug Power (although valued at under $2B, Plug Power is much smaller). We noticed a cult stock formula:
- Each features a combo of charismatic leader, revolutionary product, and tons of attention on Reddit.
- CNBC credits Plug Power's rise to campaigns on Reddit, while the Financial Times cites "coordinated buying."
- In the long run, fundamental profitability is the key driver of a stock price, so cult stocks can be vulnerable to fall if their buzzy status passes.