Why Plug Power Stock Plummeted Today

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What happened

Shares of Plug Power (PLUG -9.14%) saw a stark sell-off in Thursday’s daily trading session. The hydrogen-power technologies specialist’s share price closed out the day down roughly 9.2%.

The Federal Reserve held its second meeting of the year yesterday and announced a 50 basis-point increase for interest rates. While the actual rate hike didn’t catch many market watchers by surprise, the general tone and comments from the meeting helped spur a dramatic sell-off for the broader market. 

Image source: Plug Power.

So what

With inflation running hot, investors had broadly expected the Fed to announce a 50 basis-point increase at yesterday’s meeting. However, comments from the meeting seemed to point toward the possibility that additional 50 basis-point increases may be implemented with each of the committee’s five remaining meetings this year.

Fed Chairman Jerome Powell said that 75 basis-point increases were not being actively considered, but the mere mention of such a move seems to have helped trigger a surge in bearish market sentiment. 

Powell also warned that China’s new COVID lockdowns were likely to worsen supply chain disruptions and the war between Russia and Ukraine could have additional economic consequences for the U.S. The S&P 500 index closed out Thursday down roughly 3.6%, and the Nasdaq Composite ended the day down 5%.

Now what

While it’s possible that Russia’s invasion of Ukraine could ultimately accelerate the long-term demand trajectory for Plug Power’s hydrogen-based technologies, uncertainty related to the situation is currently working to depress the company’s valuation. Additionally, supply chain headwinds stemming from China’s recent lockdowns run the risk of becoming a much more serious near-term issue for the company. 

Plug Power now has a market capitalization of roughly $12.2 billion and is valued at approximately 13.3 times this-year’s expected sales. With the market generally shying away from growth-dependent stocks, the company’s forward-looking valuation leaves the door open for more substantial sell-offs if investors continue to become increasingly risk averse.