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A Raymond James analyst thinks this year will be a “watershed moment” for the hydrogen economy.
James MacDonald/Bloomberg The coming year will be big for hydrogen-based technologies and bring with it plenty of good news for shares of Ballard Power Systems, a Raymond James analyst predicts.
In a Monday report, analyst Michael Glen described 2021 as a “watershed moment in the history of the hydrogen economy.” He expects an accelerating number of hydrogen-related announcements by companies and countries regarding hydrogen technology and its ability to wean the world off fuels that generate carbon dioxide.
Hydrogen gas—whether burned or used in a fuel cell—doesn’t emit greenhouse gases blamed for global warming. While most hydrogen gas is made using natural gas, a process that produces harmful emissions, hydrogen can be made by passing renewable electricity through water, which would not contribute to climate change.
Nikola (ticker: NKLA) prompted U.S. investors to think more about the hydrogen economy this past summer after its shares soared when the fuel cell maker went public by merging with a special purpose acquisition company, or SPAC.
Nikola plans to build a heavy-duty semi-truck, the kind common on U.S. interstate highways, powered by electricity generated using a hydrogen fuel cell. Nikola also wants to build and operate hydrogen filling stations, profiting from the need to refill fuel tanks with hydrogen gas. Nikola plans to make hydrogen by using electricity to split water molecules.
After Nikola’s emergence, many more hydrogen projects were announced. Diesel engine maker Cummins ( CMI ) hosted a hydrogen technology event. Daimler (DAI.Germany), Royal Dutch Shell (RDS), Volvo (VOLV.Sweden), and others formed a venture to accelerate adoption of hydrogen fueled trucks. Korea’s SK Holdings (034730.Korea) invested $1.5 billion into fuel-cell technology company Plug Power (PLUG) this past week, sending its stock up 35%.
Raymond James’ Glen believes Ballard (BLDP) could announce something next. Weichai Power (2338.Hong Kong), Ballard’s largest shareholder, is raising $2 billion in cash for hydrogen projects. “It is clear to us that fuel cells represent a core component of [Weichai’s] growth strategy over coming decades,” wrote Glen. “Investors do not fully appreciate Weichai Power’s position, market share, OEM relationships and overall scale in the largest market for commercial trucks [and] buses globally.” OEM is short for original equipment manufacture and, in this case, refers to companies making heavy-duty trucks and buses in China.
Faster than expected adoption of hydrogen tech in China means more sales for Weichai, something that would benefit Ballard as a key Weichai supplier.
Raymond James’ Glen, as a result, upgraded shares of Ballard Monday—sort of. Glen took his rating from Outperform to Strong Buy. Outperform and Strong Buy are, essentially, both Buy ratings, so there isn’t really a change in how Wall Street appears to view the stock. But it shows that he’s even more bullish on the stock now than he was before.
Wall Street likes Ballard stock. More than 80% of analysts covering the company rate shares the equivalent of Buy. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 57%.
Glen raised his Ballard target price to $40 from $28, pushing the average analyst target price for the stock up about $1 to roughly $26 a share.
Ballard stock closed Monday above $29 a share. Even though analysts think Ballard stock is a Buy, they have trouble keeping up with share prices. That’s partly because Ballard stock had an incredible 2020, buoyed by increasing excitement for hydrogen fuel technologies and their wider application into transportation markets. Shares gained almost 226% last year. Shares are up another 24% year to date in 2021.