Is Ballard Power a Buy as the Electric Vehicle Industry Takes Off?

Ballard Power Systems, Inc. (BLDP) is a leading proton exchange membrane (PEM) fuel cell manufacturing company which has been in operation for nearly four decades. The company is primarily involved in the design, development, manufacture, sale, and service of fuel cell stacks, modules, and systems primarily for applications in heavy-duty motive, portable power, and material handling and backup power.

The stock has gained about 130% year-to-date. Fuel cell electric vehicles powered by BLDP have travelled over 50 million kilometers which is enough to circle the globe 1,250 times. This impressive performance and the potential upside based on a number of factors have helped the stock earn a “Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates BLDP:

Trade Grade: A

BLDP is currently trading above its 200-day moving averages of $14.10. BLDP has gained 66.5% over the past six months, reflecting solid short-term bullishness.

BLDP’s total revenue increased 9% year-over-year to $25.8 million for the second quarter ended June 2020, primarily driven by higher shipments of Heavy-Duty Motive products. Heavy Duty Motive’s revenue alone increased 94% year-over-year to $12.5 million due to high demand from China. The company’s power products platform generated revenue of $16.0 million, up 62% year-over-year.

Ahead of its third quarter earnings release on November 6th, BLDP sold its Unmanned Aerial Vehicle (UAV) business to Honeywell International (HON) to shift its strategic focus to the Heavy- and Medium-Duty Motive markets of bus, truck, train and marine. Last month, the company announced that it is expanding manufacturing capacity to six times for production of its proprietary membrane electrode assemblies (MEAs) to meet the expected growth in demand for fuel cell powered electric vehicles.

Buy & Hold Grade: C

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, BLDP is currently trading about 26% below its 52-week high of $21.61, which it hit on July 9th.

The company’s revenue increased 29.9% year-over-year and grew at a CAGR of just 5.1% over the past three years. This slow growth can be attributed to relatively high costs for its fuel cells. Also, there have been safety issues and energy retention issues. 

Peer Grade: C

BLDP is currently rated #23 out of 58 stocks in the Industrial-Equipment industry. Other popular stocks in the Industrial-Equipment group are Watsco, Inc. (WSO), Fastenal Company (FAST), and Pentair plc. (PNR).

BLDP beat the returns of WSO, FAST and PNR that gained 27.6%, 21.9% and 11.7% year-to-date, respectively.

Industry Rank: B

The Industrial-Equipment industry is ranked #34 out of the 123 StockNews.com industries. With the increasing focus on climate change, the industrial equipment industry stands to thrive. This industry has been growing owing to increased demand for cleaner energy sources.

Overall POWR Rating: B (Buy)

BLDP is rated “Buy” due to its short-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

BLDP has the potential to soar in the upcoming months, despite gaining 134% so far this year and 204.4% since hitting its 52-week low of $5.10 in March, based on its continued business growth, favorable earnings and revenue outlook, and strong financials.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is pretty impressive for BLDP. It has an average broker rating of 1.28, indicating a favorable analyst sentiment. Out of 9 Wall Street analysts that rated the stock, 5 rated it “Strong Buy.”  The consensus revenue estimate of $27.77 million for the quarter ended September 2020 indicates 8.7% increase from the same period last year. Its EPS is expected to grow at 33.3% next year. 

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BLDP shares were trading at $15.70 per share on Wednesday afternoon, down $1.10 (-6.55%). Year-to-date, BLDP has gained 118.66%, versus a 7.99% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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