On Wednesday, Piper Sandler adjusted its price target for Ballard Power (TSX:BLDP) Systems (NASDAQ:BLDP), a fuel cell manufacturer, reducing it to $2.30 from the previous $3.00 while maintaining an Underweight rating on the stock. The firm's analysis followed Ballard's recent financial performance, which presented a blend of positive and negative outcomes.
Ballard Power Systems reported revenue figures that exceeded both Piper Sandler's and the Street's expectations by 23% and 33%, respectively. However, the company's EBITDA loss widened to $44 million, falling short of projections by approximately 29%. This shortfall was attributed in part to a significant inventory write-down, which adversely affected gross margins.
Adding to Ballard's challenges was a $22 million order cancellation due to the customer's financing issues. This cancellation impacted the near-term and total backlog, despite a record increase in bookings for the fourth quarter, which saw a year-over-year growth of 24%.
While the company did not provide revenue guidance for 2024, the current backlog indicates a flat to low single-digit growth for the year, with Piper Sandler's revised estimates now at $107 million, down from the previous $110 million, and below the pre-earnings Street consensus of $125 million.
On a positive note, Ballard Power Systems has shifted its strategic focus away from investments in China, opting instead to allocate capital within the United States market. Despite this strategic pivot, Piper Sandler expresses concern over Ballard's cash reserves, suggesting the possibility of the company depleting funds before reaching a scale sufficient to offset its operating costs, unless it engages in further capital market activities.
The firm also updated its price target methodology for Ballard to year-end 2025 tangible book value per share (TBVPS), from the prior year-end 2024 TBVPS, leading to the lowered price target of $2.30 per share.
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