On Tuesday, Susquehanna has adjusted its outlook on Ballard Power (TSX:BLDP) Systems (NASDAQ:BLDP), reducing the price target to $3.00 from the previous $4.00 while maintaining a Neutral rating on the stock.
The revision follows Ballard Power's recent financial disclosures. The fourth quarter of 2023 saw the company's revenue surpass expectations, coming in at $47 million against the forecasted $34 million. However, gross margins were negatively affected by non-cash inventory charges, resulting in a -22% margin compared to the anticipated -9.5%.
"Q'23 revenue exceeded expectations, but non-cash inventory charges weighed on margins. Excluding this impact, margins would have approached breakeven," said the analysts.
The company experienced a record intake of orders during the quarter, amounting to $65 million. Nevertheless, financial difficulties faced by one of Ballard Power's customers led to the removal of $22 million worth of orders from the company's backlog. Despite efforts to reinstate these orders, the total backlog saw a 3% quarter-over-quarter decline to $131 million. The 12-month order book also decreased by 8% quarter-over-quarter, settling at $67 million.
Ballard Power's earnings per share (EPS) for the fourth quarter stood at a loss of $0.16, which was below the analyst's expectation of a $0.12 loss. The company's full-year 2024 guidance aligns mostly with market projections, and management remains optimistic about margin improvements throughout the year. They anticipate reaching breakeven or profitability by the fourth quarter of 2024.
The company's balance sheet is reportedly adequate, but its ability to generate cash is contingent upon the ongoing development of hydrogen markets. The lowered price target reflects the immediate past quarter's challenges but also considers the potential for gradual margin improvement signaled by Ballard Power's management.
InvestingPro Insights
Ballard Power Systems (NASDAQ:BLDP) has been navigating a challenging economic landscape, as reflected in its recent financial performance. According to InvestingPro data, the company's market capitalization currently stands at $863.92 million, with a trailing twelve-month revenue of $102.37 million, marking a 22.18% growth. However, gross profit margins have been under pressure, with the last twelve months as of Q4 2023 showing a -21.33% margin, underscoring the non-cash inventory charges that impacted the recent quarter.
The InvestingPro Tips highlight a mixed financial picture for Ballard Power. On the positive side, the company holds more cash than debt, and its liquid assets exceed short-term obligations, which may provide some financial stability. On the other hand, Ballard Power is quickly burning through its cash reserves and suffers from weak gross profit margins. Analysts are not optimistic about the company's profitability in the near term, with expectations that Ballard Power will not be profitable this year. Additionally, the company's valuation implies a poor free cash flow yield, and it is trading near its 52-week low, reflecting investor concern over its financial health.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available, which could offer further insight into Ballard Power's financial situation and stock performance. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these insights.
Given the company's recent performance and the forward-looking statements from management, investors may want to consider these metrics and tips when evaluating Ballard Power's prospects. The company's next earnings date is set for May 8, 2024, which will be a critical moment for investors to assess Ballard Power's progress towards its financial goals.
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