Ballard Power Gets Stock Upgrade as Hydrogen Vehicles Gain Steam
Comment of the Day

August 20 2020

Commentary by Eoin Treacy

Ballard Power Gets Stock Upgrade as Hydrogen Vehicles Gain Steam

This article by Divya Baljifor Bloomberg may be of interest to subscribers. Here is a section: 

Ballard Power, one of Canada’s best-performing stocks this year, just got an analyst upgrade as
governments and vehicle manufacturers around the world push for the development of battery and hydrogen vehicles. BLDP fell as much as 9.5% intraday Thursday in Toronto.

* Stock raised to outperform from sector perform, PT increased to C$20 from C$18 by National Bank of Canada analyst Rupert Merer

* Ballard is in discussions with potential partners in Europe and could form a joint venture with a top-tier supplier; China could have a detailed hydrogen plan come soon, targeting one million hydrogen vehicles by 2030

* Merer sees a number of positive catalysts this year and the stock is still well priced compared with its peers

* Ballard is up more than 110% this year, making it the fourth best performing Canadian stock, vs the S&P/TSX Composite Index’s 2.7% decline

* NOTE: July 29, Fuel-Cell Firm Stages Comeback 20 Years Later With Help of China

Eoin Treacy's view

I’ve created a reasonably complete list of companies from all over the world focusing on the hydrogen/fuel cell sector in the Chart Library.

Weichai Power has been extremely active in buying up rights to use and commercialise fuel cell technology developed in Europe and North America over the last few decades. The sector has never gotten off the ground because it was not economically feasible and there was not real incentive to try it out. That is now changing.

Some of the factors combining to support the trend include:  

The collapse in natural gas prices has vastly improved the cost of producing hydrogen.

The evolution of solar cell technology holds out the promise of creating an energy dense carbon free economy.

The thick pollution blanketing much of China and India calls for some form of solution that does not sacrifice the potential for economy growth.

Climate activism has resulted in regulatory and taxation headwinds for dirtier fuels while simultaneously boosting the appeal of alternatives.

As geopolitical tensions mount the case for energy independence has been never been more compelling.

The extraordinarily low interest rate environment continues to create significant distortions. It means there is a clear incentive for yield hungry investors to support any speculative venture which holds out the promise of reliable future cashflows.

The vast majority of related stocks are quite small. There is no ETF, at least to my knowledge covering it. That is a clear indication we are still very early in this cycle. The evolution of solar technology is integral to the growth of hydrogen over the medium to long-term because of the zero carbon argument. The evolution of batteries is a challenge. That suggests the use case will be limited to long range trucking, ships and planes. That’s a big market but batteries will probably win out in personal transportation.

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