Is Ballard Power surviving on Tesla’s leftovers?

Can anything stop Ballard Power Systems (Ballard Power Systems Stock Quote, Chart, News TSX:BLDP)? The stock had been flatlining for a number of years before shooting up over the back half of 2019, and its gains in 2020 have been even more impressive.

But investors who weren’t lucky enough to get in on Ballard’s run may want to hold off for the time being, says Gerard Ferguson of Jemekk Capital Management, who thinks the name is overbought.

“For us, it’s caught in that concept story stage again and at some point you’re going to have to deliver fundamentals —maybe that’s a year down the road, three years down the road— we just think the stock has maybe run a little bit ahead of itself,” said Ferguson, CEO and portfolio manager at Jemekk, who spoke to BNN Bloomberg Tuesday.

“It’s definitely getting some of the leftover dollars from Tesla, particularly for Canadian investors because it’s a Canadian company…”

“It’s off to a great start this year. There’s no real valuation or fundamental basis here, I think, for the name. That’s not a reason not to own it. It certainly could move higher and if this renewable ESG theme continues it will be one of the beneficiaries of it. So, if I owned it, I’d stick with it. We don’t own it but we’ve looked at it several times,” Ferguson added.

Hydrogen fuel cell company Ballard has seen its share price rise with the current investor trend towards clean energy stocks and the so-called ESG (environment, social justice and corporate governance) space. Ballard gained 73 per cent over the last six months of 2019 and the stock has now doubled so far in 2020.

Aside from the wider bullish market for clean tech, Ballard itself has made a couple of major announcements of late, including a partnership with automotive equipment manufacturer Weichai and a deal announced last month to make fuel cell stacks as backup power systems for radio tower sites in Germany.

“People love green energy and Ballard Power is one of the names that people flock to when they’re thinking about innovative technologies,” said Ferguson.

“If you go back to the mid- to late-90s when Ballard became public, the company is very different now than it was back then, and the only reason it still exists is they raised a billion dollars towards the end of the 90s and that has sustained them and they’ve built this company. It is decades behind where they thought it would’ve been back then —people thought there would be a technological revolution that was much quicker— but they do provide clean energy and energy systems to home owners, to businesses and as a result it’s got this premium multiple,” he said. Ferguson thinks Ballard is also benefiting from electric car maker Tesla’s recent run.

“It kind of carries in the wake of what Tesla is getting. When people think green, they think Tesla and [Ballard] does get caught up in that theme, and when you’re looking for secondary and tertiary beneficiaries of what’s happening in the EV space, Ballard is a name that should be at the top of people’s lists because they’ve been one of the pioneers in it,” Ferguson said.

“It’s definitely getting some of the leftover dollars from Tesla, particularly for Canadian investors because it’s a Canadian company,” he added.