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Ballard Power: From Bad To Worse


  • Company misses Q1 consensus expectations by a wide margin with backlog down for the fifth quarter in a row. Another equity raise increased liquidity to a whopping $1.27 billion.
  • Chinese market remains stalled as participants await further clarification on the new government subsidy policy framework (which is unlikely to increase near-term FCEV adoption anyway).
  • On the call, management warned that commercial sales for its truck, rail, and marine segments are still several years out.
  • Expect analysts to reduce estimates and price targets across the board as current consensus expectations require material downside revisions.
  • Given the very weak near- and medium-term outlook, investors should abstain from chasing the shares after Tuesday's selloff and rather wait for the Chinese overhang to lift.

Hydrogen logo on gas stations fuel dispenser. H2-Verbrennung LKW-Motor für emissionsfreien umweltfreundlichen Transport
Photo by audioundwerbung/iStock via Getty Images

Note: 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 Tuesday, investors started to lose patience with leading Canadian fuel cell systems developer Ballard Power Systems ("Ballard" or "Ballard

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 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (45)

garro profile picture
I took a short fling with FCEV about a decade ago thinking wow this could really be something. Obviously that went nowhere and I took my looses and abandoned the concept. It sounds like there is a future now but it will take lots of capital and time to reach viable sustainable commercialization.
Who are the primary players in this technology globally and is Ballard the front runner at this point in time?
leearther profile picture
@garro hmm, a loaded question.
all advanced economy's on earth have hydrogen as part of their energy solutions. many large scale hydrogen projects, coming online very soon.
where ballard, or any h2 company fits, is still to be determined.
so far, profits have been small but new tech is greatly improving margins.
as the industry ramps up, profits will scale. many players in industry.
Henrik Alex profile picture

I don't see any large-scale hydrogen projects coming online very soon and product prices need to come down for hydrogen to see adoption. Quite frankly, it's hard to see gross margins expanding meaningfully going forward.

And profits have not been "small" but rather losses are large.
Rainer-63 profile picture
Ballard got a 15 buses order from India. This should fuel the engines. If they’ll do a good work, we’ll see new highs within a year or less.
Henrik Alex profile picture

Just another tiny pilot project. I would estimate aggregate revenues of between $1-$2 million spread over multiple quarters. There won't be any follow-up orders from this project for years.
It appears as of today they will hit 100 mil at least in 2021. 18 refuse trucks and 20 buses.
Henrik Alex profile picture
@jim kaff

Come on, aggregate revenues derived from these fuel cell modules should be well below $5 million.
After all these years, why BLDP continues to be lackluster? What am I missing? Is it the Management? Business model? Competition? Or just that the industry is still not ripe enough ?

Thanks in advance
Henrik Alex profile picture
@Wow and wowwow

It's mainly the industry. Fuel cells are still many years and billions of dollars of required investment away from commercial viability.

In addition, Chinese policy support has been much weaker than expected by management and even leading domestic companies like Weichai.
@Henrik Alex
what is the realistic value based on its multiple?
Henrik Alex profile picture
@Wow and wowwow

No idea. They don't have a valid business model at this point with the company's near-term fortunes almost entirely tied to China. But expect the shares to move in tandem with larger competitor Plug Power.
renegade76 profile picture
Ballard went back to its November 2020 stock price level. What a disaster is that! After H2 stocks got hyped up, they are now hyped down. We even had a Chinese furniture company that wanted a part in this hype and added H2 to its name (after which its share price exploded). People currently trade H2 stocks like any other stocks, for their short term gain. Thats not how you INVEST into an emerging mega trend.
Ballards CEO always made it clear that 2021 will be a transitional year for the company within a new industry at inflection point. They never promised profitability for 2021 (unlike Bloom). But they always clarified that they need to position themselves in the new emerging markets with new partnerships worldwide. And that is what Ballard is doing right now (with 1.3 Billion $ on their bank account). McEwen (Ballard CEO) just came back from a 6 weeks China tour, where he deepened the Company s partnerships. Right now China and Ballard await the up to 1 Trillion Chinese infrastructure plan which will kick start the next phase of fuel cell economic development. Scaling up will be massive and Ballard at the top of it. H2 busses from 6000 to 100 000 in next 3 years etc. And my dear short term traders and bargain hunters, guess what will happen to Ballard stock price if that China news pops up within the next days or weeks.
Currently big investment funds are buying the H2 stocks which are thrown away by the little men. I wonder why that is the case.
Now is the time to INVEST in H2. Put the stocks aside and give them time, 2 - 3 years.
I could go on writing about Ballard patents and market leaderships, as the author just ridicules this notion in other comments. But instead I would advise him to look into Apple s H2 patents and maybe he will understand in which direction the future of mobility points...
@renegade76 the Siemens mireo should be a positive factor
Henrik Alex profile picture
@jim kaff

Not really. Currently, there's only one pilot project planned from 2024-2027 - only one train with Deutsche Bahn in Tuebingen, Germany.

Remember also that this was a development program similar to the Audi contract, Ballard does not hold the rights to the fuel cell and might not even be the supplier.

Given these issues, the Mireo is unlikely to be a material revenue contributor going forward.
renegade76 profile picture
@Henrik Alex "For the first nine months of 1999, Amazon lost $204.9 million, or 63 cents a share, on $963.8 million in revenue, compared to losses of $51.6 million, or 18 cents a share, in the year-ago period."
Amazon what a looser company. Ever increasing losses and just no hope at the horizon. What a bubble industry. Who would have ever bought their shares ? They made loss after loss after loss...
Steven Miller profile picture
I actually owned this in the 90s, I think. I remember attending the annual meeting or something and some investor was getting tired then of the company not making any money. Today they are still not making any money. I don't generally short stocks, but I'm half tempted to short this one. Then the other half of me considers that they just did a bought deal offering, they have a billion plus in cash alone and $74 million in total liabilities. They can burn cash indefinitely without making any money and probably still get investors to put up cash for it. I don't get it, and I'm not touching it.
Rohit Acharya profile picture
@Henrik Alex Can you please share the source of your information for the following:
1. joint venture is still sitting on approximately $47 million in unsold product inventory.
2. as compared to $23.5 million in 2020 (assuming no recognition of previously deferred revenue).
3. Guangdong Synergy Ballard Hydrogen Power Co. ("the Synergy JV") which accounted for 8.4 million of FY2020 revenues has also been impacted by the new policy framework.

Henrik Alex profile picture
@Rohit Acharya

You need to take a deep dive into the MD&A:

Rohit Acharya profile picture
@Henrik Alex Great. Thanks. Found all except the sitting inventory data. Page 11 of the document says 15 M of inventory. Nice article.
Henrik Alex profile picture
@Rohit Acharya

No, page 11 actually states that $15.1 million in revenues from the May 2019 order haven't been recognized as the JV hasn't sold the related products yet. They also deferred $8.5 million from the December 2019 order for the same reason. But they already recognized the other 50% of these orders so you need to calculate (15.1+8.5)*2 to arrive at the unsold product inventory of the joint venture.
binartech profile picture
@Henrik Alex Don't you think Chinese in the mid term will copy and produce their own H2 Fuel Cell and leave western companies specially from USA with nothing and even going after international markets ?
I do not see this as complex as copying chips which they are already doing... why not fuel cell....
Henrik Alex profile picture

Sure, that's always the plan, I guess. But the Weichai JV is contractually obliged to use BLDP MEAs. It doesn't matter anyway with the JV appearing to be just another failure at this point.
Henrik Alex profile picture
Woah, Roth Capital with a downgrade and a disastrous discovery for the company:

"Roth Capital analyst Craig Irwin downgraded Ballard Power Systems (NASDAQ: BLDP) from Buy to Neutral with a price target of $15.00 (from $32.00).

The analyst comments "While this is not final, it appears that Shandong Province, where Weichai is based, has been left off the list of first Chinese fuel cell demonstration cities. That means it is likely Weichai/Ballard will have delayed access to the China fuel cell subsidies. This coincides with the large 1Q21 revenue miss driven by Weichai revenue down ($8.7m) or (65%) Y/Y. We would look to revisit our rating after Chinese fuel cell subsidies potentially start flowing to Ballard and its partners."
@Henrik Alex thanks for the article and adding this note. Any notable companies/JVs you see benefitting from this lack of traction in the space?
Henrik Alex profile picture

Not sure what you mean. How would a fuel cell company benefit from a "lack of traction in the space"???
@Henrik Alex thanks for following up.

If China is moving forward with hydrogen, yet Ballard and JV are coming up short, who is taking their potential share of the Chinese market?

Maybe I’m just numb to the numbers (I’m not a whiz on Ballard, gone down the rabbit hole reading some your articles as I like your writing and sectors), but to me it would seem Ballard and the JV are being left behind as the country moves forward with the demonstration.
Henrik Alex profile picture
As expected, analysts have started to reduce price targets. BMO out with a target reduction from $35 to $23.
leearther profile picture
interesting assessment henrik, thank you
EdwardDG profile picture
Thanks Henrik for the article, indeed PEM Fuel cell manufacturers are years away from mass deployment, both in the truck and shipping sector

About the truck sector, I recommend everyone to read the cc transcript of Cummins $CMI , here an extract:

Mark Smith -- Vice President and Chief Financial Officer

Steve, I mentioned in my remarks, these transition solutions are important because the zero carbon solution that we're working on, those are the eventual solutions that will win the day, but eventual is the hard part, that again, the costs and the infrastructure requirements of electric fleets and/or fuel cell, or hydrogen fleets are significant. And so we believe working with OEMs that we'll be able to get those costs and those infrastructure in place, but we'll will need infrastructure, we'll need other investments by government and other things to get that done. So in the meantime, these interim solutions are going to play a significant role and how long interim is isn't clear, and it could be extended. So our view is that natural gas and hybrid and some of these other technologies that we have will really help our customers get through those periods, which again could be -- we could sell across our range of 1 billion engines, in those ranges before transition could be a billion engines. I mean, it's a lot of engines over the years, right, with -- across the entire industry, across multi-year. So it's really, it's important to be thoughtful about those transition technologies just like it is the final solutions.

RNG is probably the only option to decarbonise HD trucks in the next five to ten years, as confirmed by the Amazon positioning with $CLNE

$WPRT geopolitical risk aside, if Cummins renews the JV, this Vancouver company may perform rather well in the next years
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