We recently compiled a list of 10 Worst Falling Stocks To Buy Now. In this article, we will look at where APlug Power Inc. (NASDAQ:PLUG) ranks among the 10 worst falling stocks to buy now.
To the new investor, the stock market can appear to be an unpredictable graph that has no inherent logic to its ups and downs. However, this is far from reality as all stock performance is primarily driven by fundamentals, market sentiment, news, large buys or sells, and other factors.
As a result, the astute investor can make money on stocks by trying to predict whether a firm has sizeable catalysts that are not accounted for in the share price. Of course, this is a risky approach, and one that isn’t recommended by Warren Buffett as we covered in 10 Best Stocks For Beginners With Little Money. However, as hindsight is 6/6, looking back into time explains a lot about how firms see their share prices drop.
Diving deeper, one doesn’t have to look far to find stocks that have struggled in the wake of shocking and disappointing fundamental performance. One of the best examples of 2024 is the 12th Best Data Center Stock To Buy According to Jefferies, Citi and Wall Street Analysts. Set up in 1968, the firm has defined the era of personal computing through its processors. Yet, in a world that’s thirsty for chips in 2024, its shares are down by a painful 52% year to date and a stunning 69% since their peak in August of 2000.
So why is this stock falling even though it has $191 billion in total assets, $25 billion in cash and equivalents, and generated $55 billion in trailing twelve month revenue? Well, the answer is simple. During its second quarter of 2024, the firm’s profit dropped by 85% annually as it posted a net loss of $1.6 billion. Its size and scale had enabled the firm to be a dividend paying stock, a fact that had helped it retain some stock value even as troubles started to become evident last year. The current dividend yield is 2.29%, but the dividends will be suspended starting Q4 as part of the firm’s $10 billion cost reduction plan.
Its shares tanked by 30% after the second quarter earnings, and investor pessimism is baked in due to the competitive nature of the semiconductor industry. The chip manufacturer has lost its lead in developing cutting edge semiconductor manufacturing technologies to a Taiwanese rival, and investors are on the sidelines as its own 18A chip process is only expected to lead to revenue in late 2025 and beyond.
Yet, even though a 52% year to date drop is bad, it doesn’t make the firm one of the worst falling stocks right now. When we consider falling stocks with a market capitalization greater than $300 million, one notable example in 2024 is an autonomous driving stock that was a billionaire hedge fund boss’s 4th best long term stock pick as of Q3 2023. The fund had first bought the stock in Q2 2021, and its shares are down by 73% year to date.
This firm manufactures light detection and radar (LiDAR) sensors that are primarily used by autonomous vehicle companies to sense their environment. As has been the case with the chip manufacturer, the firm’s troubles also have to do with its business. However, while the semiconductor industry is robust, the auto industry and particularly the electric vehicle sector have struggled due to high rates depressing prices. For this particular stock, the troubles were evident in February when the shares slipped by 10% after it announced that its biggest customer Volvo was experiencing production delays.
The woes were further exacerbated in April after a BofA note downgraded the shares to Underperform from Neutral and slashed the share price target to $1.20 from $3.50. Its stock tumbled by 16% as the analysts noted that “model launch delays and reduced volume expectations for vehicles expected to adopt LIDAR technology drive a meaningful drop in our volume forecasts.” The final nail in the proverbial coffin came in August after $16.5 million in revenue and $0.18 loss per share missed FactSet analyst estimates of $20.4 million and $0.17 million. The stock dived by another 37% and has been in the dumps since then.
Speaking of the car industry, another falling stock in 2024 was ironically the 11th best performing stock on the NASDAQ exchange in 2023 as of October 2023. The stock had posted a 288% gain by then, and in 2024, the shares are down 78.8% year to date. This firm is a lithium miner, however, it has yet to produce a profit, and operating expenses have increased right when lithium prices are at historically low levels. The lithium industry slowdown has pushed out its profit estimates for the future, and consequently, the shares have suffered.
Our Methodology
To make our list of the worst falling stocks to buy, we ranked the 50 worst performing stocks of 2024 with a market cap greater than $300 million by their short interest as a percentage of shares outstanding. Out of these, the stocks with the highest short interest percentage were selected.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of a laptop monitor with stock market prices scrolling up and down.
Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders In Q2 2024: 15
Short Interest % of Shares Outstanding: 28.39
YTD Share Price Loss: 54.6%
Plug Power Inc. (NASDAQ:PLUG) is a clean energy company that focuses on products that use hydrogen. As a result, it’s unsurprising that the stock is down 56% year to date as the broader clean energy sector has struggled. Hydrogen is a relative niche in clean transportation products, which doesn’t bode well for Plug Power Inc. (NASDAQ:PLUG) as capital for the industry dries up. This slowdown is also evident in Plug Power Inc. (NASDAQ:PLUG)’s financials, as the firm’s loss widened to $262 million in Q2 from $236 million in the year ago quarter. Additionally, investors have also factored in a potential change in the US Administration after the November election, which could affect government support for the company’s projects. Plug Power Inc. (NASDAQ:PLUG)’s shares have been troubled in 2024 as a $200 million equity offering caused a 10% drop in July. It dipped by another in August after second quarter revenue was $143 million and loss per share was $0.36, both of which missed FactSet estimates of $185 million and $0.31. Given that analysts expect Plug Power Inc. (NASDAQ:PLUG) to hit profitability in 2028 after it generates $4 billion in revenue, the headwinds are unsurprising.
Plug Power Inc. (NASDAQ:PLUG)’s management shared key details about its revenue during the Q2 2024 earnings call:
“Looking at Q2, more specifically, we have made progress on our sales, cost down and cash management initiatives. And I would highlight as an example, the level of electrolyzers deployed, which represents a clear inflection point on this ramping activity. But these new nascent offerings with nuanced commercial contracts and products being used in much larger customer project deployments makes it challenging on the timing on revenue recognition. On a positive, as Andy mentioned, for the majority of the programs deployed where the revenue will be recognized in the second half, we’ve already delivered. We’ve transferred the title and collected most of the cash via milestones. So this is truly a factor of timing. In addition, this large quantity of programs provides a substantial base of experience and insight to accelerate deployments based on learnings and the ability to constructively improve commercial terms to benefit the company financially and to enhance the accounting of these activities.”
Overall PLUG ranks 1st on our list of the worst falling stocks to buy now. While we acknowledge the potential of PLUG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PLUG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey. All investment decisions should be made after consulting a qualified professional.