Why Virgin Galactic, Plug Power, and Genius Brands Stocks All Dropped Monday

What happened

Virgin Galactic (NYSE: SPCE), Plug Power (NASDAQ: PLUG), and Genius Brands (NASDAQ: GNUS): What do a space tourism company, a manufacturer of fuel cells, and a producer of children's cartoons have in common?

All three of these stocks declined in price in Monday trading, with Virgin Galactic shares shedding 4.5%, Plug stock dropping 4.4%, and Genius Brands closing the day 5.6% lower.

3 colorful arrows all pointing down

Image source: Getty Images.

So what

None of these companies had any bad news to report today, and all three report earnings next month. Yet they declined in price on a day when the S&P 500 rose 0.8%, and the Nasdaq soared 2.5%?

There really isn't any answer to why that happened. The declines came after Genius Brands soared 46% in a single day earlier this month, and Virgin Galactic jumped 15% when it removed the CEO who had brought it public. And Plug Power had roughly doubled in price when it announced a dubious plan to double down on its bet that the hydrogen economy will replace electric cars as the alternative energy story of the future.

Now what

Lacking profits upon which to anchor a P/E ratio valuation (none of these three companies has ever earned a profit), Virgin Galactic, Plug Power, and Genius Brands all tend to trade as "story stocks."

When investors like the story a stock is telling, they can buy it regardless of price (and with no P/E, there's no way to say the P/E is too high). On the other hand, when there's no news to drive the story forward, and no profits upon which to argue that the stock has become cheap, there's little to dissuade investors from selling if the story seems to be going stale.

I suspect that lacking news to trade on, investors lost interest today and the stocks fell.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Virgin Galactic Holdings Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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