Is it finally time to buy Ballard Power?

What do we make of Ballard Power (Ballard Power Stock Quote, Chart, News, Analysts, Financials TSX:BLDP), a company that’s gotten a whole lot of attention over the years but proved to be a perennial disappointment? Yet now with hydrogen fuel cell technology being touted by governments worldwide as part and parcel of their climate change commitments, is now the time for Ballard to shine?

Possibly, says portfolio manager Jamie Murray, who thinks with the stock having pulled back from its first quarter highs, investors may want to get in while they still can.

“Hydrogen has been all the rage in the market this last six months to a year,” says Murray, head of research at the Murray Wealth Group, who spoke on BNN Bloomberg on Monday. “Ballard has done a couple of large financings that have been swallowed up by institutional investors. And we own a little bit of Ballard in our Canadian portfolio, as well.”

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“We do think we are entering that Golden Age for hydrogen,” Murray said.”We’ve had a couple of false starts over the past 20 years but it really feels like there’s the combination of financial, social and public interest in really making hydrogen a reality in terms of producing it for vehicles or whatever transportation use they’re going to find.”

Ballard Power had been a steady climber over the past couple of years but the stock really kicked it into high gear around the end of 2020, going from $25 at the start of December to as high as $52 by early February. The fallback has been just as steep, however, with BLDP dropping below the $25-mark just last week before bumping back up a couple of bucks this week.

Why the volatility? Part of the issue is likely the rise and fall of interest in hydrogen and fuel cell stocks as a group over the past year, culminating in February and dropping off precipitously over the past two months. Take a look at the charts for other names in the space like Fuelcell Energy (NASDAQ:FCEL), Bloom Energy (NYSE:BE) and Plug Power (NASDAQ:PLUG) and you’ll find similar ups and downs in recent months.

But for Ballard, the company’s fourth quarter results delivered in early March might not have helped things, coming as they did with quarterly revenue down 32 per cent year-over-year and down two per cent for the full 2020 year compared to 2019. Granted, COVID-19 would have played a role in the decline, but likely just as disappointing from an investor’s point of view was a drop in the company’s order backlog, which went from $128.1 million at the end of the third quarter to $117.8 million by the year’s end.

In its commentary, management said while 2020 was challenging, the future is still sparkling for hydrogen.

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“With about 50 countries announcing CO2 pricing initiatives, 75 countries with net zero targets, and over 30 countries with hydrogen strategies, we believe Ballard is well positioned to realize significant growth in the coming decade,” said president and CEO Randy MacEwen in a press release.

“As a result, we are increasing and accelerating our investment to drive high growth, high market adoption and high market share for the benefit of long-term shareholder value,” MacEwen said.

Murray said there’s definitely a big risk factor with investing in a name like Ballard.

“We’re still early in it but I think with a company like Ballard you’re going to get a lot of growth out of it, but it’s very expensive right now and even some of that growth doesn’t really start for two to three years,” Murray said.

“We’ve been talking about some of the bubbly activities [in the market] and hydrogen would definitely fall into that spectrum, but we think Ballard is definitely more legitimate than a lot of these other companies out there,” he said. “So, what it really comes down to is, is what Ballard does in making these fuel cells not going to get commoditized and get competed away and it’s not going to really be anything special or is Ballard going to be one of the few players in the world that’s making fuel cells and growing 20-25 per cent a year for the next couple of decades as hydrogen production and use explodes? That’s really the question.”

“I think Ballard has a place in a portfolio as a small, speculative position, and definitely it’s better to be buying it at $26 than at $46 where it was in January. Now is probably a good time to be chipping away at it, and we just bought a little bit more last week,” Murray said.

Ahead of Ballard’s first quarter 2021 financials due in early May, the company’s fourth quarter saw total revenue of $28.6 million, down 32 per cent year-over-year, and an adjusted EBITDA loss of $14.5 million compared to $7.0 million a year earlier.