Should You Buy Ballard Power Stock in January 2023?

Since last year, BLDP stock has dropped 38% and a massive 82% since January 2021.

| More on:
Electric car being charged

Image source: Getty Images

Shares of Ballard Power Systems (TSX:BLDP) have been a brutal wealth destructor. In the last year, the stock has dropped 38% and a massive 82% since January 2021. While many new-age growth stocks have been on a downtrend since last year, Ballard Power has lost a majority of its value due to its weaker fundamentals.

But as people talk about how hydrogen fuel cells are the next big thing, why are Ballard Power and many of its peers losing value?

Ballard Power: What does it do, and what has it achieved?

Ballard Power designs, develops, and sells PEM (Proton Exchange Membrane) fuel cells that are used in buses, trucks, railways, and marine applications. A fuel cell is an environmentally clean electrochemical device that produces electricity with a combination of hydrogen fuel and oxygen.

According to the company filings, Ballard’s PEM fuel cell products feature high fuel efficiency, low operating temperature, low noise and vibration, compact size, quick response to changes in electrical demand, and a modular design.

Hydrogen is gaining ground as an alternate fuel as the only byproduct it produces is water vapour. As a result, it could make a substantial difference if we want to achieve a net zero emission target in the long term. However, hydrogen as a fuel is not economically competitive in the current environment because of the lack of scale.

To put that in perspective, it costs around US$18.58 to US$33.44 per dekatherm to produce hydrogen, while natural gas costs around US$1.00 to US$4.5 per dekatherm. However, as the scalability grows, the cost of the hydrogen fuel cell will fall and increase adoption, making it more lucrative for producers.

Ballard Power: Financial growth

Ballard Power has a diversified revenue base and exposure to high-growth regions. It generates 20% of its revenues from North America, China contributes 35%, while Europe brings in 40%.

In the last 12 months, the company reported a net loss of $183 million on total annual revenues of $100 million. Its cash-rich balance sheet with negligible debt is a silver lining.

However, Ballard Power has been seeing flattish to declining revenue growth for the last few years. The fuel cell maker continues to operate at a net loss. While hydrogen as a fuel could see multi-fold growth in the long term, it is in the nascent stage right now. Ballard Power may need time to turn operationally profitable.

Ballard Power stock has had a positive start to 2023 and soared almost 20% since the beginning of the year. Even after the stock has started on a long-term downtrend, it does not seem appealing from a valuation standpoint. BLDP stock is currently trading at a price-to-sales ratio of 23x and looks expensive.

Taking the long view

Ballard has to see a consistent increase in revenues, which will boost investor sentiment. Its operating costs will also have to decline remarkably to achieve sustained profitability.

After a streak of interest rate hikes last year, the cycle is expected to continue, at least in the first half of 2023. Higher rates make growth stocks like Ballard less appealing, as we saw last year. So, higher rates and inflation could negatively impact its financials and stock price performance this year. Investors can look for other attractive TSX growth stocks with consistent profitability and solid growth prospects.

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.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Tech Stocks

Tech Stocks

3 Reasons to Buy Shopify Stock Like There’s No Tomorrow 

Shopify stock fell 25% after reporting disappointing guidance. Should investors buy the dip and hold the stock for the long…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

3 Canadian Growth Stocks I’d Buy Under $30

These under $30 Canadian growth stocks are well-positioned to capitalize on mega trends such as e-commerce, the electrification of vehicles,…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

Why This Tech Stock Just Jumped 18%

This tech stock just saw shares surge after announcing it was being acquired, but more growth could still be in…

Read more »

Group of people network together with connected devices
Tech Stocks

Prediction: My 2 Top TSX Stocks to Beat the Market in 2024 and Beyond

Looking for stocks set to beat the market in 2024 and well beyond? Here are two tech stocks set to…

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer TSX Stocks I’d Buy Right Now Without Hesitation

Three TSX stocks that continue to overcome massive headwinds and beat the market are no-brainer buys right now.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Dividend Stocks

This Dividend Stock Just Jumped 10%! Time to Buy?

This dividend stock is way up after being included in a major index, making it a prime time to pick…

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

This is the Best AI Stock to Buy Right Now

Investors have a wide selection of AI stocks to choose from, although the best buy today is not the most…

Read more »

grow dividends
Tech Stocks

If This Fast-Rising Stock Isn’t Yet on Your Radar, it Should Be!

Here's why Constellation Software (TSX:CSU) remains a top TSX growth stock long-term investors ought to consider right now.

Read more »