Time to sell your Ballard Power stock?

National Bank Financial analyst Baltej Sidhu says Ballard Power Systems (Ballard Power Systems  Stock Quote, Chart, News, Analysts, Financials NASDAQ:BLDP) continues to improve margins and backlog while its planned GeoPura acquisition strengthens its longer-term growth profile.

As reported by the Globe and Mail, in an Aug. 6 update, Sidhu maintained his “Sector Perform” rating on Ballard and lowered his target to US$4.50 from US$4.75. The average target is US$3.77.

“BLDP continues to execute, with greater margins, improving backlog and the GeoPura platform enhancing its long-term growth profile and recurring revenue mix,” Sidhu said.

Ballard reported Q2 revenue of US$21-million, up 15% year-over-year. Gross margin was 20%, a 28-point improvement from a year earlier and the company’s fourth consecutive quarter of positive and improving gross margins.

Order intake was US$64-million, lifting backlog to US$157-million. Ballard ended the quarter with US$502-million in cash and cash equivalents.

Ballard also announced a definitive agreement to acquire GeoPura for £275-million upfront, subject to closing conditions and regulatory approvals. The deal is expected to close later this year and would move Ballard into energy-as-a-service through GeoPura’s hydrogen generator leasing model.

CEO Marty Neese said the acquisition should improve revenue visibility and increase Ballard’s exposure to recurring service-based revenue in off-grid alternative power.

Sidhu said the combination strengthens Ballard’s path toward profitability by the end of 2027 while expanding its addressable market into hydrogen-powered energy-as-a-service.

Neese said margin gains reflect cost reductions, a shift toward higher-margin service revenue and improved fuel cell durability, which allowed the company to reverse some warranty provisions recorded in prior years.

Ballard said Q2 order intake included bus market orders and a multi-year commitment for 154 fuel cell modules to GeoPura.

Sidhu lowered his target because of estimate revisions.

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