Ballard Power Stock Drops 10% on Monday: Time to Buy?

Ballard Power (TSX:BLDP)(NASDAQ:BLDP) stock dropped by 10% on Monday after a brief climb due to its announcement last week.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 25, 2022 8:00 am EST

Ballard Power Systems (TSX:BLDP)(NASDAQ:BLDP) shares fell by up to 10% on Monday, as the wider market dropped right along with it. But as this clean energy company falls, should investors see it as an opportunity to buy Ballard Power stock?

What happened?

It seems investors wanted to take their returns on Monday after Ballard Power stock climbed to about $13.75 last week. This came after news the company would be expanding its partnership with Canadian Pacific Railway.

CP stock ordered eight more 200-kilowatt fuel cell modules from Ballard Power stock. This would support the railway’s hydrogen locomotive program, bringing it from one to three locomotives sometime this year. As CP continues to “significantly expand” its program, Ballard Power looks like it can climb right along with it.

So what?

Let’s first look at this deal. The recent addition brings the order from CP to a total of 14 hydro fuel cells. But it seems to only be the beginning. By 2030, Ballard Power stock estimates that the hydrogen-electric train business will reach $4 billion. And it’s already seen the benefit of this move in the United Kingdom, and in Europe and Asia. And even better news? Part of the expansion will be funded by the Emissions Reduction Alberta (ERA) program, giving the deal $15 million to address climate change.

Now, let’s look at the big picture for Ballard Power stock. When the rest of the world is focused in on electric vehicles, this company focused in on every other type of vehicle. Buses, army and marine vehicles, and, yes, trains — Ballard addresses them all. That leaves an endless amount of room for the hydrogen fuel cell company to expand.

Now what?

Ballard Power stock remains significantly below fair value, especially considering the growth over the next few years. Analysts give it a consensus target price of $26 as of writing. That’s more than double its share price of $12, as of writing.

Now, granted, some target prices dropped recently thanks to the supply-chain demand Ballard Power stock continues to experience. Even still, analysts believe the company has as strong future ahead. Even in the next year. It has $1.2 billion on the books, making it an ideal company for merger and acquisition growth in 2022.

So, is Ballard Power stock a buy? I’d say, absolutely — especially for long-term investors looking for a great deal.