Is Ballard Power Systems Stock A Buy?

Ballard Power Systems Inc (NASDAQ:BLDP) is one of the handful of companies benefitting from a hydrogen fuel cell boom in the 2020s.

It started with Plug Power making waves during the COVID holiday season, and Ballard came up strong at the start of 2021. FuelCell Energy and Bloom also made gains, showing the industry’s strength.

Is Ballard Power Systems stock a Buy after such a big price spike?

The market needs to stabilize, but one thing for sure is that investors are excited about the technology. Each company made moves in the commercial vehicle industry, with Ballard selling its FCmove-HD fuel cell modules to Arcola Energy, a U.K.-based fuel cell company building Scotland’s first hydrogen-powered train.

Each of these companies seems to benefit from news about the other, pitting them in a race to the top of an emerging market. Hydrogen fuel cell energy could be a more sustainable solution than lithium-based electric vehicles. Storage capacities and power capabilities are much different.

Of course, with great power comes great responsibility. Let’s flip the switch on Ballard Power Systems to see if it’ll fuel growth for investors’ wallets or crash at the starting line.

Ballard Power Systems 101

Ballard Power Systems is a Canadian proton exchange membrane (PEM) fuel cell manufacturer. These products are meant for heavy-duty commercial, industrial, and municipal vehicles, like buses and trains.

The company was founded by Geoffrey Ballard in 1979 to research high-energy lithium batteries but switched to fuel cells a decade later. Since then, it has spun off its consumer fuel cell company in a joint venture with Daimler AG and Ford to focus on its commercial applications.

It entered a strategic partnership with Weichai Power in 2018 that gave the Chinese company 19.9 percent of Ballard’s shares in exchange for opening it up to the Chinese truck, bus, and construction vehicle market.

Ballard also has development and distribution deals in place with Audi, Van Hool, New Flyer, and Solaris. It’s also working on drones. This gives it a strong presence on the global market that could lead to lucrative long-term supplier contracts if it succeeds.

And so far, its fuel cells traveled over 30 million kilometers by 2020, proving the efficacy of its solution for clients.

Is Ballard Power Systems Stock A Buy?

Ballard Power Systems had a market capitalization over $10 billion by Q1 2021. BLDP share price fell to a 52-week low of $6.95 but recovered to pre-pandemic trading levels of around $20.00 per share within months.

In the middle of January 2021, stock prices soared, reaching highs of $38 per share before seeming to level off. The company benefited both from the announcement of a new partnership and from investor confidence in the industry as a whole.

The company’s second quarter 2020 revenue was $25.8 million, which is a 9 percent year-over-year increase from the same quarter of 2019. By Q3, it reported a 4 percent year-over-year increase to $25.6 million driven by heavy duty and backup power sales increases.

Power products alone increased 94 percent in the quarter. Still, it reported an $11.2 million loss for the quarter.

But investors are still optimistic, since the company holds $362 million in cash and had no debt ending the pandemic year. There’s still risk involved.

Will BLDP Share Price Drop?

The biggest risk facing Ballard Power is the fuel cell industry experiencing a bubble that fizzes. It’s great to see double-digit market value gains in a single day, but that’s also a signal of volatility to more conservative investors.

Many already feel Tesla is already overvalued, and these fuel cell companies are somewhat driving in its wake. As consumer tastes change, hydrogen fuel cells are unlikely to gain much traction.

Instead of charging lithium batteries, fuel cells use…well…fuel. And some can deliver 300 miles or more on one tank of fuel. Of course, this means it needs to depend on a fuel cell network competing with Tesla’s Supercharger stations and traditional gas stations.

And it’s not growing across every sector – the company’s technology solutions reported a $6.5 million year-over-year decrease in third quarter sales.

That’s an expensive task that the company will need a lot more partners to overcome. And it’s not the only player in the game.

Ballard Power Competes Against Plug Power

Ballard Power Systems has multiple competitors in its niche. Plug Power (PLUG) kicked 2021 off with a Renault partnership that puts its fuel cells in commercial vans across Europe. Both Bloom and FuelCell are aggressively seeking partnerships as well.

Hydrogen fuel cells are preferred over gasoline vehicles because they have zero emissions. This is a critical part of maintaining our planet’s ozone layer and sustaining the environment.

But it’s not the only alternative fuel either – electric vehicles and their gas hybrid companions give consumers reason to keep to the old ways of doing things. The only way Ballard or any car company will make traction is if it changes consumer tastes and spends heavily on the same buildout Tesla and its electric competitors built.

Until then, it’ll remain competing for commercial projects. However, this isn’t a small market, and its progress means it can be very profitable in the future for investors.

Is Ballard Power Systems Stock A Buy? Summary

Ballard Power Systems is a hydrogen fuel cell company that saw its market value skyrocket at the start of 2021. This happened because the company formed a partnership to develop a demo version of a hydrogen fuel cell train for Scotland.

If successful, it could set the company up for further expansion into more industrial projects.

But it’s not alone – multiple fuel cell companies have similar technologies. And those technologies are competing with electric vehicles and existing gas and hybrid vehicles. It’s going to be a hard race to win, but the company has no debt and a bright future ahead.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.