There’s a lesson to be learned from Ballard Power (Ballard Power Stock Quote, Chart, News TSX:BLDP), according to research analyst Brooke Thackray of Horizons ETF Management Canada, but it’ll likely be a painful one for investors unlucky enough to catch the wave at the wrong time.
Renewable energy, clean tech, battery and fuel cell companies, they’re all hot as heck right now, none more so than the likes of Ballard, which shot up 73 per cent over the back half of 2019 and has now gained an incredible 87 per cent over the first stretch of 2020.
Thackray says it remains a bit of a mystery as to why the sudden spike but the market’s newfound love for electric car maker Tesla, which has tripled since October, could be a factor.
“If you take a look, Ballard has been ripping and this is mirroring Tesla,” says Thackray, speaking to BNN Bloomberg on Thursday. “If you look at Virgin Galactic, it’s up three times in three months. So, we’ve seen this rush into stocks. I really can’t answer why it’s taking place other than that there’s a lot of speculation.”
Thackray says that while Ballard’s chart may look impressive it should also be sending off warning signals to would-be buyers.
“This is actually a very dangerous position from a technical perspective. When you get a parabola-shaped price move like this you can’t predict how high it’s going to go but it tends not to [consolidate], it tends to all of a sudden collapse,” Thackray says. “Ballard could go much higher and then collapse, but at some point it will pull back — it won’t slowly fade off into the sunset. It’ll go higher and correct or it will correct right now.”
Ballard did have a bit of good news of late that may have helped stoke the flames, starting in December with the announcement of a $19.2-million order for its joint venture with China’s Weichai Power but also a sales agreement for fuel stacks with German telecom company adKor and power company SFC Energy for an unspecified amount, announced last month.
Deals like those are not only a positive for Ballard but a vote of approval for hydrogen fuel cell technology itself, which is still in its early stages in terms of commercial application —hence the promise of future growth and profitability spurring stocks like Ballard.
Ahead of fourth quarter financials due on March 5, Ballard last reported at the end of October where its Q3 featured revenue of $24.8 million and an adjusted EBITDA loss of $7.2 million, with gross margins of 25 per cent. Those numbers compared to $64.4 million in revenue a year earlier with negative $20.8 million in EBITDA and gross margins of 22 per cent.
Thackray says the volatility in stocks like Ballard becomes an issue when the market starts heading south.
“These are the stocks we have to be very careful with,” Thackray says. “You have to watch it because if the market is making a strong move, has a high beta and is fairly speculative, this stock will probably keep going. But if the market corrects this one will correct sharply.”