No matter how accurately we can run the numbers now and how advanced trading models have become thanks to artificial intelligence (AI) and data science, market sentiment still remains one of the driving forces behind the rise and fall of certain stocks.
Positive anticipation has historically elevated certain securities (like cannabis stocks) much higher than their fundamental strengths could have, resulting in bloated growth and massive crashes. The same thing happened to electric vehicle (EV) and related mining stocks to some degree, but in the midst of all this, there is an overlooked business that may become huge if the conditions are right.
The majority of the market is pessimistic about it. Hence, it’s trading at a massive 91% discount, and as per the relative strength index, it’s closer to being oversold than overbought. But it may prove the market wrong in a magnificent way.
The company (and technology)
Ballard Power Systems (TSX: BLDP) is one of the most prominent names in the global fuel-cell industry. Fuel cells take in hydrogen as a fuel, turn it into electricity, and release water as waste.
Hence, they can be used to create zero-emission vehicles (ZEVs) that are different from EVs and, in two ways, far superior to them. They don’t require batteries to store charge, so their mining-related footprint is almost negligible compared to EVs.
Secondly, they can refuel in a fraction of the time it takes for an EV to fully recharge. Vehicles based on fuel cells are also lighter because they don’t carry the weight of batteries, making them more efficient. Vehicles are just one of the use cases of fuel cells. They can also be used for backup power.
Despite these clear advantages, the reason this technology hasn’t taken hold in the market on the same scale as EVs is that hydrogen is costly to produce and dangerous to store and handle.
Extensive research is being done to make hydrogen more feasible as a fuel source, and a few breakthroughs in this area can propel fuel cells to new heights of demand. And companies like Ballard Power Systems will ride this momentum.
The stock
The stock managed to ride on the positive momentum generated by early market optimism, going over 1,000% in less than two years. But after hitting the peak in 2021, the stock has mostly gone downward. The long-term slump has caused the stock to lose over 90% of its valuation.
But this long-term bear market phase has been good for the stock’s valuation. It’s now more fairly priced. The financials of the company have been fluctuating for quite some time, but that doesn’t mean it’s a financially dangerous bet.
The company has over a billion in cash and investments and just $24 million in debt. So, it can wait under the right circumstances for years without incurring a lot of debt just to stay afloat.
Foolish takeaway
Ballard Power Systems also has an early bird advantage in the fuel cell industry. It is a mature business that may have the output capacity to meet the needs of the market even if the demand for fuel cells surges unexpectedly. This makes it perfectly positioned to take advantage of any breakthrough related to hydrogen as a fuel.
