Should You Buy Shares of Ballard Power?

The stock price has collapsed since March. Has this created an opportunity?

| More on:
The Motley Fool

Back in March, shares of fuel cell supplier Ballard Power (TSX: BLD)(Nasdaq: BLDP) were flying high, reaching as high as $9.32, five times as high as their January 1 price. The company had reported excellent results for the 2013 fiscal year, with revenue up 40% and the gross margin improving by 10 percentage points.

Since then, Ballard’s investors have seen the bottom fall out of their investment. As of late Wednesday morning, the shares were trading below $3.50. So is this an opportunity to scoop up Ballard shares at a discount?

Tied to Plug Power

Investors in fuel cell forklift supplier Plug Power (Nasdaq: PLUG) have been on an even wilder ride. A year ago, the shares traded at $0.22. By January 1, they had reached $2.33, a more than 10-fold increase. Then in March the shares traded as high as $11.72. Since then the bottom has fallen out, and the shares trade at about $3.80.

Plug Power uses fuel cell technology supplied by Ballard, which is why their fortunes (and stock prices) are so intertwined. And Plug did have some great wins, such as a deal to supply 1,700 forklifts to Walmart. But Plug’s share price started its slide when Citron Research identified it as a “casino stock”. Investors who bought the shares last year have still done very well. But those who had poor timing have gotten burned.

So what now?

Has this created an opportunity to buy shares of Ballard or Plug? To find out, let’s take a look at some basic numbers.

First, a look at Ballard. Even though the stock has fallen off a lot, the shares are still very expensive at over six times revenue. And the company is not yet profitable – when looking at 2013 numbers, the company lost $21.7 million last year.

Plug’s numbers are even more extreme. In 2013, the company had total revenue of $26.6 million, which was flat relative to the prior two years. And the net loss was nearly $63 million. Yet the company trades at a market capitalization of $560 million.

Still casino stocks

Both Ballard and Plug seem to be trading well above their fundamental values; investors clearly are hoping that their shares will be bid up some time in the future, even if the fundamental value is much less. This is a dangerous game to play; despite the recent selloff, your best bet is to avoid the shares of both companies.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair holds no positions in any of the stocks mentioned in this article.

More on Investing

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, November 7

After the rally driven by the U.S. presidential election results, TSX investors will shift their focus to the Fed’s interest…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Is Brookfield Stock a Buy, Sell, or Hold for 2025?

BAM stock recently jumped after beating earnings. But is it still a buy, or is it better to wait?

Read more »

Make a choice, path to success, sign
Dividend Stocks

Is Fortis Stock a Buy for its Dividend Yield?

Fortis has increased the dividend for 51 consecutive years.

Read more »

oil and gas pipeline
Energy Stocks

Is TC Energy Stock a Good Buy?

TC Energy stock has a lot going for it, but there are also a few red flags to consider before…

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

3 Top Canadian Utility Stocks to Buy in November

Are you looking for some top Canadian utility stocks to own? Here's a look at three must-have options for any…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Is First Capital REIT a Buy for its 4.8% Yield?

First Capital is a REIT that offers you a tasty dividend yield of 4.8%. Is this TSX dividend stock a…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

TFSA Passive Income: 3 Stocks to Buy and Never Sell

Stocks like Fortis Inc (TSX:FTS) are worth holding long term.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

Canadian Utility Stocks to Buy Now for Stable Returns

Given their regulated business, falling interest rates, and healthy growth prospects, these three Canadian utility stocks are ideal for earning…

Read more »