Short interest data is worth keeping an eye on. Short sellers tend to be high-conviction traders. If they’re targeting a stock, it can indicate that the stock has significant downside risk.
In this report, we are going to look at the short interest data on Plug Power Inc (PLUG:US). Plug Power is a US company that is engaged in the development of hydrogen fuel cell systems. It is listed on the Nasdaq Composite and currently has a market capitalization of approximately $10.16 billion.
Rising Short Interest
Looking at the short selling data here, we see a couple of things that are worth highlighting.
One is that short interest is quite high at present. Currently, 134.71 million PLUG shares are on loan. That represents approximately 26% of the free float. This tells us that sentiment towards the stock is quite bearish currently.
Another is that the number of shares on loan has risen by around 70% over the last three months. This tells us that the short sellers have been ramping up their downside bets recently. In other words, they’ve been growing more bearish on the stock.
Why Plug Power is Being Heavily Shorted
As for why Plug Power is being targeted by short sellers right now, it may be because they believe the hydrogen company will disappoint investors in the near term. It’s worth noting that in October, Plug Power told investors that it was scaling back its production forecast for 2022 to 50 tons/day of green hydrogen from 70 tons/day. It also dropped plans to build two new production plants.
It could also be due to the fact that Plug Power is losing a ton of money. For 2022 and 2023, analysts expect the renewable energy company to post net losses of $619 million and $367 million respectively.
Of course, it could simply be a valuation issue. Currently, analysts expect Plug Power to post revenue of $822 million for 2022. That gives the stock a price-to-sales ratio of around 12.4, which is relatively high.
Whatever it is the short sellers are focused on here, we think caution is warranted the stock in the near term. Right now, short sellers are having a lot of success shorting unprofitable growth companies.