On Tuesday, Roth/MKM adjusted its position on Ballard Power Systems (TSX:BLDP) (NASDAQ: NASDAQ:BLDP), reducing the price target to $3.00 from the previous $3.50, while maintaining a neutral stance on the stock. The firm's analyst cited Ballard's fourth-quarter revenue exceeding expectations, which brought adjusted gross profit margins close to breakeven, excluding a one-time inventory charge of $10.2 million.
The improved financial performance was attributed to the company's strength in the European Stationary Power market.
Despite the positive revenue development, the analyst highlighted some concerns regarding the future. The company's backlog—a key indicator of future revenue—saw a quarter-over-quarter decrease of 8% in the 12-month backlog and a 3% drop in the total backlog.
Management at Ballard Power Systems has indicated that the current backlog is expected to cover approximately 60%-65% of the projected revenue for 2024, suggesting a forecast of around $100 million to $110 million. The analyst noted comfort with these estimates.
Ballard Power Systems has decided to pause the development of its China membrane electrode assembly (MEA) facility. Instead, the company is now aiming to leverage the incentives provided by the Inflation Reduction Act (IRA) to establish a similar facility within the United States. The Roth/MKM analyst expressed skepticism regarding this strategic shift, indicating a cautious outlook for the company's plans to capitalize on the IRA subsidies.
The report concluded with the analyst reiterating a neutral rating on Ballard Power Systems shares, indicating a wait-and-see approach amid the company's operational adjustments and the uncertain backdrop of its order backlog. The revised price target reflects the analyst's updated assessment of the company's near-term financial prospects.
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