Why Plug Power, Bloom Energy and ChargePoint shares crashed today

What happened

Growth stocks were among the hardest hit by Monday’s sell-off, regardless of sector. power plug (PLUG -11.03%), flowering energy (BE -8.45%)Y Charging point holdings (CHPT -16.05%) There were three such clean energy stocks that took a hit and fell 12.5%, 14.1% and 16.4%, respectively, near their lowest points during the day today.

Each of these companies operates in a high-potential industry, and the Biden administration also announced big plans for the hydrogen and electric vehicle (EV) industries in recent days. However, when fear strikes, investors often ignore the big picture and follow the herd.

And that

Inflation in the US has hit 40-year highs, raising fears that the Federal Reserve may resort to more aggressive interest rate hikes than previously expected.

Investors are now trying to gauge how the Fed will react to soaring inflation at its meeting scheduled for Tuesday. The Consumer Price Index rose 8.6% year over year in May, its steepest rise since December 1981. Rising fuel and food prices are largely to blame.

Markets fear that the Fed’s rate hikes could now be higher and faster, potentially triggering a recession.

If the economy slows down, Plug Power, Bloom Energy and ChargePoint could have a harder time increasing their sales. That’s scary as these are all loss-making businesses, and investor conviction precariously hinges on top-tier growth for such businesses.

Worse yet, high interest rates add to borrowing costs, meaning the path to profitability for these growing companies could be much longer if the US slips into a recession.

Plug Power, for example, had nearly $105 million worth of long-term debt as of March 31 and incurred a loss of about $157 million in the first quarter. Bloom Energy had $280 million in long-term debt as of March 31 and reported a loss of $78 million for the quarter. ChargePoint had $294 million worth of debt as of April 30 and incurred a net loss of $89 million during that quarter.

Now what

Investor fears about growth stocks amid recession risks are not entirely unwarranted, but it is also true that shares of Plug Power, Bloom Energy and ChargePoint have already lost significant value in recent weeks.

Plug Power, for example, has plummeted 50% from the beginning of April to the time of this writing. However, the company recently secured its largest electrolyzer order yet and a deal to build a green hydrogen plant in Europe, a region striving to switch to clean energy in a bid to reduce reliance on fossil fuels. . Plug Power expects its revenue to more than triple to $3 billion by 2025 from its 2022 estimate.

Bloom Energy has even bigger plans for annual revenue worth $15 billion to $20 billion by 2031, up from the $1 billion it generated last year. In fact, Bloom Energy’s solid oxide fuel cell power servers that can supply uninterrupted power have already found buyers in some of the world’s largest organizations.

Both Plug Power and Bloom Energy are betting on green hydrogen which is now seen as an important source of clean energy that could help economies decarbonise. Meanwhile, ChargePoint is a play on one of the fastest growing industries today, electric vehicles, as the largest electric vehicle charging company in North America.

With the Biden administration poised to pump billions of dollars into building green hydrogen hubs and an electric vehicle charging network of 500,000 chargers across the US under the bipartisan infrastructure bill, actions Plug Power, Bloom Energy and ChargePoint could soon be back on the radar. of long-term investors.

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