With key partnerships, cost improvements and a rich intellectual property ownership, Ballard Power (TSX:BLD, NASDAQ:BLDP) is building momentum in the fuel cell sector, says Byron Capital analyst Dev Bhangui.
On Monday, Ballard reported its Q1, 2014 results. The company lost $3.8-million on revenue of $14.0-million, a 13% lift from last year’s first quarter.
CEO John Sheridan talked about the company’s performance.
“Our Q1 results reflect continued improvement in key metrics, consistent with our business outlook and full-year guidance for 2014,” he said. “Top line revenue grew 13% year-over-year and, on the bottom line, we achieved a 23% reduction in cash operating costs and a 60% improvement in Adjusted EBITDA. We also strengthened our liquidity position, ending Q1 with cash reserves of $41.6 million, due primarily to the exercise of warrants related to our 2013 equity financings.”
Bhangui, commenting on the selloff that followed what was perceived to be a soft quarter for Ballard, says that response was simply short-sighted. “We believe this judgment to be in error, superficial, myopic, not accounting for what is yet to come in the next three quarters,” he said.
Bhangui says there are significant drivers in all the segments of Ballard’s business for the rest of 2014 and beyond. He believes that the company’s telecom backup power business will deliver a run-rate of $10-$11-milion by the second half of the year, and that this high-margin revenue will be a “pillar of future revenue growth…”. He also notes that the launch of fuel cell cars from several manufacturers are imminent. on top of that, the Byron Capital analyst says opportunities for Ballard to monetize its intellectual property were vastly increased with the recent acquisition of United Technologies. “Ballard is now the IP elephant in the room,” says Bhangui.
In a research update to client this morning, Bhangui maintained his “Hold” rating on Ballard Power, but raised his one-year target on the stock from (U.S.) $3.25 to $4.00.