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Westport Fuel Systems-Time To Accumulate After Share Decimation

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Mark Krieger's Blog
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Summary

  • second quarter results were a fantastic surprise-shares celebrating in extended hours trading (up 20%).
  • sales exceeded expectations by 16%.
  • earnings beat was 13 cents.
  • 2021 earnings estimates of .03 are a joke-look for 20 cents in 2021 and 40 cents in 2022.
  • $1 billion in revenues by 2025.

galit has been a wild ride indeed...the shares rose over six fold, only to see (WPRT) a 60% haircut. The fact is, the stock simply went up too high, too fast. The stock's subsequent demise was actually a healthy thing. A dose of hearty profit taking. it should of never went up as high as it did , in the first place.

A decent first quarter report, along with a successful secondary offering, failed to abate the "hate selling" either. The good news is that second q estimates are in the gutter and should be cinch to blow out of the water. Earnings will be issued Thursday, August 5th, after the bell. This is earlier than usual, so that could be interpreted as a good sign. WPRT is forecasted to more than double its revenues from $36 million to $73 million (last year's second quarter was effectively shut down due to covid). The best news? The company finally got bold and predicted the following: "We have set targets to grow our business to $1 billion in annual revenue by mid-decade at industry standard margins".

The insanity prevails on the bottom line, with analyst estimates concluding a 2 cent loss versus a 2 cent net profit. That amounts to a negative 4 cent negative profit swing, even though sales will be up over 100%.This makes absolutely no sense to me. Are those analysts on crazy pills? Look for earnings to double to 4 cents. For the full calendar year, the street is guiding just 3 cents, coupled with a $12.50 target price. I am forecasting earnings of 20 cents, along with a 40 earnings multiple. That places my target price at $8.00

I was way off on my sales expectations of $73 million. WPRT produced a sales beat of 16%, with a top line of $85 million. Earnings came in at 11 cents. That was 13 cents superior to analysts projections of a 2 cent loss. My 4 cent estimate, was actually spot on, if you take out WPRT's one time gains. The company's cash hoard swelled to $167 million, so it has ample liquidity to launch its Chinese venture, as well as develop hydrogen applications.

In 2022, I am expecting earnings to be five times the analysts expectations of 8 cents. If WPRT produces 40 cents in earnings in 2022, that places the shares at a forward multiple of just 13...Watch it happen. These analysts aren't as smart as many give them credit. If they were, they'd be traders/ investors instead of analyzers.

the bottom line? The research community is dead wrong. They are way too low on their earnings estimates, yet way too high on their target price.

Update on China Weichai HPDI 2.0: Although we have been waiting for vehicle certifications for longer than expected, it appears that one Chinese truck OEM is already marketing its trucks with the new HPDI 2.0 engine. In addition, the contract was just expanded- the amended agreement with Weichai Westport, prompts WPRT to supply at least 25,000 HPDI systems through December 2024.

This leads me to believe, we might get formal confirmation on this development. If that happens, the share price could jump 20% on the news. The bottom line is, the stock could rally back to double digits, sooner rather than later.

One huge caveat? if we get some Reddit help from "Wall Street Bets", just like (CLNE) did, all bets are off. That alone, could put the stock into the stratosphere, pushing the share price as high as $20, and creating a nightmare come true for shorts.

Analyst's Disclosure: I/we have a beneficial long position in the shares of wprt either through stock ownership, options, or other derivatives.

the model depicted in the article is for entertainment purposes only. Her sharpie, secured in her waistline, was used for autograph purposes only

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