Tuesday, Truist Securities adjusted its price target on shares of Ballard Power Systems (NASDAQ:BLDP), a company involved in the hydrogen fuel cell industry. The new price target is set at $2.00, down from the previous $3.00, while the firm retains a Hold rating on the stock.
The adjustment reflects the analyst's view of the challenges within the global hydrogen market, comparing Ballard Power's situation to a "chicken or the egg" dilemma. Ballard Power is faced with the need to expand its manufacturing capabilities to achieve economies of scale and consistent positive gross margins.
However, the current market demand for the company's offerings isn't sufficient to justify such an expansion, as evidenced by the company's book-to-bill ratio of approximately 0.3x in the second quarter.
Despite the company's strong cash position and lack of debt, which the analyst notes could make Ballard Power a speculative bet on the future growth of the hydrogen sector, there is a belief that there are limited catalysts to drive the stock's performance in the near term (NT).
In light of these considerations, Truist Securities has revised its estimates and reduced the price target to reflect the current market conditions and the company's performance. The decision to maintain a Hold rating suggests a neutral outlook on the stock's potential movement in the immediate future.
In other recent news, Ballard Power Systems has been the subject of a revised financial outlook by Jefferies, which cut the firm's price target on Ballard's shares from $3.25 to $2, while maintaining a Hold rating. This follows Ballard's recent earnings report, where the company's revenues fell short of both consensus and Jefferies' own forecasts. Ballard reported quarterly revenues of $16.1 million, missing the expected $18.9 million consensus and the $19.6 million estimate set by Jefferies.
The company's EBITDA for the period was reported at a loss of $35.4 million, slightly better than the consensus expectation of a $36.1 million loss. Despite the mixed financial outcomes, Ballard's management has reiterated its guidance, expressing confidence in achieving positive gross margins in the fourth quarter.
These recent developments also include Ballard's launch of its ninth-generation PEM fuel cell engine, the FCmove XD, and progress with Project Forge to scale graphite bipolar plate production. The company expects revenue in the fourth quarter to account for approximately 50-60% of the company's full-year revenue, indicating a significant reliance on the latter part of the year to bolster financial performance.
Despite slow market adoption and policy uncertainty, Ballard ended the quarter with $678 million in cash and remains optimistic about the bus market, which saw a revenue increase of over 120% in the first half of the year. The company is also advancing opportunities in the U.S. rail market and targeting the stationary power market through strategic partnerships, such as with Vertiv.
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