A pair of analysts on the Street downgraded Burnaby, B.C.-based Ballard Power Systems Inc. (BLDP-Q,
) following Monday’s release of weaker-than-expected second-quarter financial results and a reduction to its capital expenditure budget as management acknowledged “slower market adoption” for hydrogen technology.
TD Cowen’s Aaron MacNeil moved his rating to “sell” from “hold” previously, saying the release provided “limited read-throughs on our go-forward and full-year estimates,” and expecting cash burn to continue.
“While featuring minor changes, our estimates already included meaningful reductions in operating expenses (now down 25 per cent from management’s 2024 guidance midpoint), consistent with management’s conference call commentary,” he said. “Notably, the Rockwall Giga 1 factory is not contemplated in our go-forward spending assumptions and if Ballard reaches a positive FID for this expansion, our forecasted cash balance would likely decrease.”
His target slid to US$1.50 target from US$2.50. The average is US$3.76.
“While we view a wholesale recovery in hydrogen fuel cell demand unlikely, Ballard could move to aggressively reduce its costs, potentially preserving more cash than we are currently forecasting,” he noted.
Elsewhere, CIBC’s Krista Friesen moved Ballard to “underperformer” from “neutral” with a US$1.6 target, down from US$3.50.
“Ballard provided a disappointing update with its Q2 earnings, reporting order intake of just $5-million in the quarter (versus $65-milion in Q1/24 and $25-million in Q2/23). While we believe the company is operating well, and is achieving key product milestones, the macro environment is increasingly less supportive of hydrogen adoption, and the upcoming U.S. election adds an additional level of uncertainty,” said Ms. Friesen.
Other analysts making target adjustments include:
* National Bank’s Rupert Merer to US$3 from US$4 with a “sector perform” rating.
“The market is nascent, resulting in order lumpiness with nearly $130-million of orders in the prior two quarters helped by deals in the European stationary power and bus segments, including its recently announced deal with Solaris, and Vertiv,” said Mr. Merer. “The 12-month backlog of $75.5-million should support a ramp up in H2E versus H1E, though year-over-year growth may be challenging with the market backdrop and upcoming election.”
* BMO’s Ameet Thakkar to US$1.70 from US$2.25 with an “underperform” rating.
“BLPD’s latest results did little to boost hopes that an inflection in demand for its fuel cell applications focused on mobility is at hand. The company cut its FY 2024 capex guidance as it considers whether it should precede with its proposed TX gigafactory when demand has been slower to ratchet up. In the near term, disappointing quarter with respect to orders/backlog growth. 2Q orders of $5-million, 12-month order book declined to $75.5-million, and the company’s backlog shrunk to $169.5mm. We trim FY 2025 estimates and target; maintain Underperform rating,” he said.
* Jefferies’ Dushyant Ailani to US$2 from US$3.25 with a “hold” rating.