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.
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.
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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