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Ballard Power Systems - Q4/2019 Takeaways - Strong Top Line Beat But Margins Disappoint

Henrik Alex profile picture
Henrik Alex


  • Strong top-line beat but gross margins disappoint as 60% of revenues were derived from sales to the company's Chinese joint ventures. Backlog down sequentially.
  • Broad-Ocean likely to discontinue strategic relationship potentially resulting in some overhang on the shares as the company owns an almost 10% stake in Ballard Power Systems.
  • Company projects FY2020 revenues of $130 million, roughly in line with current analyst consensus.
  • Announced intention to sell up to $75 million of new shares into the open market.
  • After the most recent rally, valuation appears entirely off the charts at almost 20x projected FY2020 revenues. A short sale might yield decent results should the current hype abate.


I have covered Ballard Power Systems (NASDAQ:BLDP) previously, so investors should view this as an update to my earlier articles on the company.

On Wednesday, leading Canadian fuel cell systems developer Ballard Power reported Q4/2019 results and provided its initial FY2020 outlook.

The company's shares have performed admirably over the past couple of months, more than doubling from the slight dip experienced after the Q3 report in late October 2019.

The hype correlates almost perfectly with the ongoing squeeze in Tesla's (TSLA) heavily shorted shares so I would assume market participants have increasingly been picking up fuel cell- and other alternative energy stocks as sideplays here.

At a $2.5 billion market capitalization and a FY2020 revenue multiple of close to 20, the company is, by far, the most expensive U.S. exchange-listed fuel cell stock:

Source: Yahoo Finance, Author's own work

Clearly, investors are betting big time on the company's endeavours in China despite uncertainties around the extension of national FCEV subsidies beyond this year and the recent corona virus outbreak.

Without much further ado, let's now take a look at the company's Q4 numbers and initial FY2020 guidance:

Reported revenues of $41.9 million came in substantially above expectations, outperforming analyst consensus by almost 35% mostly due to a massive surge in sales to the company's joint ventures in China.

Sales under the recently amended MEA supply agreement with the company's legacy joint venture in China, Guangdong Synergy Ballard Hydrogen Power Co. ("the Synergy JV"), came in at $6.5 million, an almost 500% sequential increase while revenues derived from its new, all-important joint venture, Weichai Ballard Hy-Energy Technologies Co. ("the Weichai JV") surged by almost 150% quarter-over-quarter to $18.8 million.

In aggregate, sales to its Chinese joint ventures represented more than 60% of Ballard Power's Q4 revenues.

Unfortunately, margins associated with

This article was written by

Henrik Alex profile picture
I am mostly a trader engaging in both long and short bets intraday and occasionally over the short- to medium term. My historical focus has been mostly on tech stocks but over the past couple of years I have also started broad coverage of the offshore drilling and supply industry as well as the shipping industry in general (tankers, containers, drybulk). In addition, I am having a close eye on the still nascent fuel cell industry.I am located in Germany and have worked quite some time as an auditor for PricewaterhouseCoopers before becoming a daytrader almost 20 years ago. During this time, I managed to successfully maneuver the burst of the dotcom bubble and the aftermath of the world trade center attacks as well as the subprime crisis.Despite not being a native speaker, I always try to deliver high quality research at no charge to followers and the entire Seeking Alpha community.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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