On Wednesday, Raymond James adjusted its outlook on Ballard Power (TSX:BLDP) Systems (NASDAQ:BLDP), reducing the price target to $4.00 from $4.50, while maintaining a Market Perform rating on the stock. The adjustment follows Ballard Power's fourth-quarter earnings, which fell short of expectations despite strength in the Stationary vertical due to increased shipments to European customers.
The revised model takes into account Ballard's cost-reduction initiatives and the anticipated benefits of scaling up sales, leading to a new gross margin forecast for 2024. The analyst predicts that Ballard could reach a gross-margin breakeven point by late 2024. The revised forecast includes operating costs for 2024 projected at $145-165 million and capital expenditures (CAPEX) at $50-70 million, favoring the lower end of the range.
Ballard Power's order backlog experienced a sequential decrease to $130.5 million, down from $134.6 million in the previous quarter. This was attributed to increased bookings in power products, which make up 84% of the backlog, with roughly 80% of orders coming from European and North American customers. The fourth quarter saw $64.7 million in new orders, which was partly offset by $47.1 million in engine shipments and the removal of $21.7 million in orders due to a customer's financial and program delays.
Looking to the future, Ballard Power has identified the U.S. as the top priority for its next manufacturing facility, which will focus on producing key components such as Membrane Electrode Assemblies (MEAs), bipolar plates, and modules. The company is expected to provide more details on this development soon and has also applied for government funding, with feedback anticipated in the near term.
Despite challenges, there is optimism about Ballard's potential, especially with the prospect of increased bus orders from Europe and the U.S. Ballard has reported strong order volumes from Solaris and is also engaged in a promising partnership with New Flyer in the U.S. market. However, the outlook for Ballard's joint venture in China remains uncertain, with limited visibility into the market's recovery.
InvestingPro Insights
Ballard Power Systems (NASDAQ:BLDP) has been navigating through a challenging period, as reflected in the recent price target adjustment by Raymond James. To provide investors with a deeper understanding of Ballard's financial health and market position, let's consider some key metrics and insights from InvestingPro.
InvestingPro Data shows that Ballard Power Systems holds a market capitalization of approximately $848.98 million, indicating its size in the sector. The company's Price to Earnings (P/E) ratio stands at -4.82, with an adjusted P/E ratio for the last twelve months as of Q4 2023 at -5.94, suggesting that investors are expecting future growth despite current losses. Additionally, the stock's Price to Book (P/B) ratio at the end of Q4 2023 was 0.86, which can be appealing to value investors looking for assets potentially trading below their intrinsic value.
From an operational perspective, the Revenue Growth for the last twelve months as of Q4 2023 was 22.18%, showing a promising increase in sales. However, the Gross Profit Margin for the same period was -21.33%, indicating that the company is facing challenges in maintaining profitability at the gross level.
InvestingPro Tips suggest that while Ballard Power Systems is holding more cash than debt, which is a positive sign of liquidity, the company is quickly burning through its cash reserves. This is further emphasized by the tip that Ballard is not expected to be profitable this year, and its valuation implies a poor free cash flow yield. Moreover, the stock has experienced a significant decline, trading near its 52-week low, which could represent a potential entry point for investors who believe in the company's long-term prospects.
For investors seeking additional insights, there are more InvestingPro Tips available that could help in making a more informed decision. For instance, knowing that Ballard's liquid assets exceed its short-term obligations provides confidence in the company's ability to meet its immediate financial commitments.
To explore further insights and tips on Ballard Power Systems, including the total of 12 InvestingPro Tips available, visit InvestingPro. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing even more value to your investment research process.
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