Growth stocks – they come in all shapes and sizes. While Ballard Power Systems Inc. (TSX:BLDP) has not yet shown us real growth, we can see all the signs that it’s bubbling beneath the surface. In fact, Ballard is increasingly gaining traction as a leading global provider of innovative clean energy and fuel cell solutions.
In this article, I will discuss why I think Ballard Power is one of the best growth stocks today.
Growth stocks are an important part of a well-diversified portfolio
One cannot argue with the numbers – Ballard Power has yet to show us consistent revenue and earnings growth. This is not a fact that we should ignore. And it’s not something that we should gloss over. But the truth is that an emerging industry such as the fuel cell industry is fraught with added uncertainties and risks. This comes with the territory.
I think that the key things to remember here are twofold. The first is that we should hold a diversified portfolio of stocks. The second is that growth stocks are, by their very nature, risky. But that’s okay, because if we have that diversified portfolio, we can take that risk with a small portion of it. Clearly, growth stocks have their place in a well-diversified portfolio.
BLDP on the TSX – a volatile but promising growth stock
There are many opinions on TSX stock Ballard Power, but I think it’s safe to say that the overriding opinion is that it’s just too risky. It’s actually pretty shocking to most when they learn that Ballard has been around for decades. That’s 40 years of developing and improving on its hydrogen Proton Exchange Membrane (PEM) fuel cell technologies. Yet, Ballard is still trying to make this fuel cell business work. The time and money commitment are pretty staggering.
But the key is that things really are different today. The world has gotten behind clean energy in a big way. In Europe, for example, the policy target is to reduce greenhouse gas emissions by 55% from 1990 levels by 2030 and be net zero by 2050.
So, there’s finally this big push to decarbonize, and fuel cells are increasingly playing a part. In Europe, for example, there’s strong hydrogen demand and policy support. In fact, 12 countries offer purchase subsidies for fuel cell electric buses and trucks.
Today, more than 400 Ballard-powered fuel cell electric buses are in-service or development in 15 European countries. Furthermore, Ballard estimates that up to 100,000 zero emissions buses will be deployed in the next 10 years. But that’s not all. Fuel cells are also powering other heavy-duty vehicles such as trucks, trains, ships, and one day, even planes.
Making a business out of fuel cells
It’s pretty clear that today, Ballard’s fuel cells are a really expensive endeavour. Thus, Ballard’s earnings have been non-existent. Add the necessary capital expenditures and research and development costs to this, and we arrive at a pretty dismal bottom line. But nobody said that it would be easy. In fact, it’s the very definition of difficult.
Somewhere down the line, however, all of this might pay off – and pay off big. Ballard’s fuel cells have all the hallmarks of a disruptive technology – a clean energy source to power our vehicles. At the same time, the total cost of owning a fuel cell electric vehicle is falling significantly, making it more feasible. For example, fuel cell electric heavy duty vehicles are expected to be cost competitive with battery electric vehicles by as early as 2025. Furthermore, they’re expected to be cost competitive with internal combustion engines by as early as 2028.
For those investors that aren’t comfortable getting in at such an early and uncertain stage, sit back but keep an eye on the developments. There’s a lot of time to establish a position if you so choose. For other investors, you might choose to tuck TSX stock Ballard Power (BLDP) into your well-diversified portfolio and forget about it. In this case, this bet you made on what could be one of the best growth stocks in the years to come could eventually be your biggest winner.
