BLDP stock still a pass, Roth says

“Tepid”.

That’s how Roth MKM analyst Craig Irwin describes the outlook for Ballard Power (Ballard Power Stock Quote, Chart, News, Analysts, Financials NASDAQ:BLDP).

On March 11, BLDP reported its Q4, 2023 results. The company posted an Adjusted EBITDA loss of $44.1-million on revenue of $46.8-million, a topline that was up 132 per cent over the same period a year prior.

“Our transition to a commercial products company is gaining momentum, with growing market acceptance of our fuel cell engines across our verticals,” CEO Randy MacEwen said. “We shipped a record number of fuel cell engines in the quarter, allowing us to close out the year with Q4 revenue of $46.8 million, up 132% year-over-year. We also booked $64.7 million of new orders in Q4, resulting in a product-based Order Backlog now 15% higher than the same period last year. Supported by revenue scaling in the quarter, we were able to improve gross margins by eight percentage points compared to the prior year period. Notably, excluding non-cash inventory provisions, underlying gross margin almost achieved breakeven, demonstrating continued success in our product cost reduction initiatives and the impact of operating leverage.”

The analyst summarized the quarter.

“Ballard posted 4Q23 rev upside lifting adj-GPM’s to near breakeven excluding $10.2m in inventory charges. Strength came from Stationary Power in Europe, but the outlook is tepid signaled by the (8%) and (3%) Q/Q drop in 12-mo and total backlog, respectively. Mgmt indicated backlog covers ~60%-65% of 2024 rev, implying a roughly $100m-$110m outlook, and we remain comfortable with our estimates. Mgmt has put the China MEA facility on hold and targets IRA subsidies for a similar facility in the US, but we remain skeptical.”

In a research update to clients March 12, Irwin maintained his “Neutral” rating and but lowered his price target on BLDP from $3.50 to $3.00.

The analyst thinks the company will post EBITDA of negative $154.5-million on revenue of $102.4-million in fiscal 2023. He expects those numbers will improve to EBITDA of negative $153.7-million on revenue of $110.0-million in fiscal 2024.

“Factors that could cause shares of BLDP to deviate from our target price include: (1) commercial volumes significantly above or below expectations in any one of BLDP’s end market segments; (2) changes to competition from competing technologies; (3) entry and exits of competition in the PEM fuel cell sector; (4) changes in global subsidy programs,” Irwin added