Plug Power stock price has rebounded, but a risky pattern points to a dive

Plug Power stock price jumped by 16% on Thursday, its best day in months, after the company tweaked a key deal with Walmart. It soared to a high of $2.60, its highest level since November last year. So, is this a dead-cat bounce or will the rally be sustained?

Why the Plug Power stock jumped 

Plug Power share price jumped by over 16%, catching many short-sellers by surprise. This rebound happened after the company and Walmart tweaked their agreement, a move that will lead to lower dilution.

The deal will see Walmart stepping away from exercising a warrant, which gave it the right to buy more than 55 million shares. In such a situation, Plug Power would have issued 42 million shares to honor the original goal.

In a statement this week, Walmart said that it had forfeited 30 million shares and another 7 million that had not vested yet. In exchange, Plug Power agreed to a licensing deal with Walmart. 

The announcement came as Plug Power’s business continues to struggle and risks of future dilution continue. Data shows that the company’s outstanding shares have been in a strong uptrend in the past few years, moving from a low of 566 million in 2021 to 1.2 billion today.

This dilution has continued despite the company receiving cheap financing from the Department of Energy, which gave it a $1.6 billion loan.  

Additionally, the hydrogen industry has not become as popular as was widely expected in the past. For example, the chances of hydrogen vehicles becoming popular have dropped in the past few years, with a company like Toyota ending production.

While hydrogen is a source of green energy, its costs are usually substantial and most potential customers would prefer using other forms of energy. This explains why the energy source has not become popular in the data center industry.

The most recent results showed that Plug Power’s business generated $177 million, an increase from the $173 million it made in the same period the previous year. Most of this revenue came from the sale of its equipment, which made $96 million. Its equipment sales dropped from $107 million.

Plug Power’s power purchase agreements made $24 million, up from $20 million, while fuel delivery to customers made $35 million.

The company continued losing millions of dollars, while its net loss rose to $363 million. This loss-making will likely continue in the foreseeable future.

Plug Power share price technical analysis 

The daily timeframe chart shows that the Plug Power stock price has retreated in the past few months, moving from a high of $4.56 on October 6 to the current $2.60. 

A closer look shows that the stock has formed a bearish flag pattern, which is made up of a vertical line and an ascending channel. This pattern often leads to more downside.

The stock remains below the 50% Fibonacci Retracement level. Therefore, the most likely scenario is where it continues falling, potentially to the key support level at $2.  A move below the key support level at $2 will raise the odds of it falling to the $1.54, which will benefit its substantial short sellers.

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