On Wednesday, Piper Sandler adjusted its outlook on Ballard Power (TSX:BLDP) Systems (NASDAQ:BLDP) shares, a leading provider of clean energy and fuel cell solutions.
The firm decreased the price target for Ballard Power to $2.20 from the previous $2.30 while maintaining an Underweight rating on the stock. The revision follows Ballard Power's recent financial results, which fell short of expectations.
Ballard Power reported revenues that did not meet the projections by Piper Sandler and the broader market, missing by 6% and 18%, respectively.
Moreover, the gross margin for the company was significantly lower than anticipated, coming in at negative 37.5%, which was over 1700 basis points below expectations. Despite this, there was an approximate 400 basis point improvement from the first quarter of 2023.
The company's bookings remained strong, totaling $65 million, contributing to a backlog that now stands at $181 million, marking a year-over-year increase of 31%. This robust backlog is a positive indicator of the company's ongoing business activities.
Additionally, Ballard Power has been focusing on its manufacturing strategy, particularly with the announcement of plans to construct a new facility in Rockwall, Texas.
While management has not yet detailed how this new plant will affect the company's profitability, they have indicated that a more comprehensive overview will be provided later in the year.
Piper Sandler's decision to maintain the Underweight rating stems from expectations that Ballard Power's revenues will remain below the level needed to support its operational cost structure for some time.
The lowered price target reflects a modest decrease in the year-end 2025 tangible book value, which takes into account increased financial obligations and a slightly higher share count.
InvestingPro Insights
Recent data from InvestingPro reveals key financial metrics for Ballard Power Systems (NASDAQ:BLDP) that may offer investors a deeper understanding of the company's fiscal health and market position. With a market capitalization of approximately $840.01 million, Ballard Power's valuation metrics show a Price to Book ratio of 0.88 for the last twelve months as of Q1 2024, suggesting that the stock may be trading at a value close to its net asset value. Additionally, the company has experienced a significant revenue growth of 36.14% over the last twelve months, which, despite the company's current lack of profitability, may indicate potential for future growth.
However, it's important to note that Ballard Power is not expected to be profitable this year, with a negative gross profit margin of -20.88% over the same period. The company also does not pay a dividend, which might be a consideration for income-focused investors. On a more positive note, one of the InvestingPro Tips highlights that Ballard Power holds more cash than debt, providing a degree of financial flexibility. Furthermore, the company's liquid assets exceed its short-term obligations, which is an encouraging sign of financial stability.
For those seeking further insights, additional InvestingPro Tips are available, including analysis on the company's valuation and cash flow yield. With these considerations in mind, investors can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, granting access to an extended range of expert tips and real-time data. There are 6 more InvestingPro Tips available for Ballard Power Systems, which can be found at: https://www.investing.com/pro/BLDP.
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