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Fuel cell stock up 500% thanks to ... Walmart?

March 11, 2014: 4:11 PM ET
Plug Power has surged thanks to an order of fuel cells by Walmart for the retailer's forklifts. But traders are too excited.

Plug Power has surged thanks to an order of fuel cells by Walmart for the retailer's forklifts. But traders are too excited.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

If you needed any more evidence that trading and investing are not the same thing, look no further than the insanity that is Plug Power (PLUG).

The company's stock is up nearly 300% so far this year. It had been up about 500% when this column first posted earlier today. But more about that later.

Why? A big chunk of the gains came after Plug, which makes hydrogen fuel cells, first announced in mid-February that it had received a big order from a "leading retailer."

Two weeks later, the company named the retailer, saying Walmart (WMT) was ordering more than 1,700 of Plug's GenDrive units to help power forklifts in some of its distribution centers.

Getting such a big order from a company the size of Walmart is obviously good news. But does it justify a stock price surge of this magnitude?

No.

This looks like a case of traders doing their best to hype a stock and not worry about pesky little things like fundamentals.

Sure, the success of electric car company Tesla (TSLA) could be helping lift Plug Power and other fuel cell stocks. Some traders may be betting that this time, the alternative energy boom is for real.

Just look at how well two Plug Power rivals, Ballard Power Systems (BLDP) and FuelCell Energy (FCEL) have done this year.

But Plug Power is expected to report its fourth-quarter results Thursday, and analysts are forecasting a loss for the quarter and full year. The company has routinely bled red ink since its inception.

You see, Plug Power has been around for awhile. It went public in 1999 ... the last time that tech stocks and the Nasdaq were trading at levels like this.

Throughout the past 15 years, there have been several periods where fuel cells and other alternative energy sources have been hyped as the next big thing.

And if you've had the misfortune of owning Plug since its IPO, you're still way underwater on it ... even after the huge move of the past few months.

Plug is still a highly speculative stock. As recently as last fall, the company was in danger of being delisted by the Nasdaq because its shares were trading under $1 a share for an extended stretch.

When the CEO appears on CNBC like he did late last week, and the stock goes up on that "news," you know that traders are just having fun moving in and out of this puppy.

The recent spike, as dramatic as it may be, should not be misinterpreted as a sign that long-term investors now believe the company is the next Facebook (FB) or Google (GOOG).

Now before you blast me for just not getting the promise of alternative energy ... or worse, accusing me of being in the pocket of some short sellers ... I'll have you know that I do appreciate the broader sector.

I own a tiny amount of shares of the PowerShares WilderHill Progressive Energy Portfolio (PUW) exchange traded fund. That ETF has stakes in some speculative stocks like uranium miners Dennison (DNN) and Cameco (CCJ), as well as methanol producer Methanex (MEOH).

But it does not currently own any fuel cell companies. And I'm not betting the proverbial ranch on this ETF either. (My investment is worth less than $250.)

I just worry that some investors who see what Plug Power's stock has done will get fooled into thinking that it's a no-brainer (to use a Carl Icahn-ism) of a buy.

Nothing could be further from the truth.

After all, Plug is still a stock that many short sellers are betting against. At the end of February, more than 20% of the available shares were held by investors who've borrowed the stock and expect it to fall.

Just look at what the stock did Tuesday. Shares surged out of the gate and plunged 40% by the end of the day! It was a move that would make even Bitcoin investors nauseous.

The stock's run reminds many market graybeards (me included) of what happened to Iomega as the tech bubble was inflating. Iomega surged on tremendous hype about its zip drives. Shares hit a peak of about $100 a share in the mid-1990s.

It didn't last. Iomega didn't live up to its potential. EMC (EMC) ultimately acquired the company in 2008 ... for $3.85 a share.

If something looks too good to be true, it probably is.

Fear & Greed
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