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Ballard Earnings: Focus Remains on Securing New Orders, Minimizing Cash Burn

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We lower our fair value estimates to $4/CAD 5.50 from $5/CAD 6.50 for no-moat Ballard Power Systems BLDP following its third-quarter results. The lower valuation is due to moderating our long-term revenue growth and gross margin assumptions. We view shares as fairly valued.

Given the early stage of Ballard’s business, our focus is on platform wins and order intake versus near-term financial results. Order intake in the third quarter declined to $15 million compared with $25 million in the second quarter. Ballard did not disclose any new platform wins in the quarter. Sales pipeline remains concentrated within the company’s bus, truck, and rail verticals—which account for 75% of the pipeline.

Ballard remains focused on minimizing its cash burn given the early stage of its business and current capital market environment. The company expects roughly flat operating expenses in 2024 (relative to 2023) and $5 million-$10 million lower capital expenditures year on year. To reduce cash burn, the company is also narrowing its operations to focus on its core fuel cell stack and modules. As a result, Ballard restructured its Ballard Motive Solutions operations (acquired in 2021), which resulted in a $24 million impairment. The company also discontinued its corporate development activities. We maintain our expectation that Ballard won’t reach profitability until late this decade given the early-stage nature of hydrogen fuel cell demand.

We view Ballard shares as fairly valued. Ballard enjoys a first-mover advantage in fuel cells for heavy motive applications, but long-term competition from industry incumbents as well as other technologies (battery electric) leave us awaiting a wider margin of safety.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Brett Castelli

Equity Analyst
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Brett Castelli is an equity analyst, energy and utilities, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. His coverage focuses on clean energy companies across renewables and emerging technologies.

Before joining Morningstar in 2021, Castelli spent more than eight years in various analyst roles for TortoiseEcofin, a boutique asset manager. His coverage focused on North America and included companies within traditional energy, electric utilities, and renewables. Additionally, he assisted with the firm's environmental, social, and governance efforts and played an important role in integrating ESG into the investment process. Castelli spent a year at the firm's London office following an acquisition.

Castelli holds a bachelor's degree in finance from the University of Missouri's Trulaske College of Business. He also holds the Chartered Financial Analyst® designation.

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