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Here's What Fueled Ballard Power Systems' 7% Pop in October

By Scott Levine - Nov 3, 2017 at 12:35AM

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Investors took kindly to this hydrogen hopeful last month -- just like they had during the first nine months of the year.

What happened

Shares of Ballard Power Systems ( BLDP 0.95% ), a leader in fuel-cell solutions, climbed 7% last month. The stock's notable rise in October seems trivial when considering its performance in general during 2017. From the beginning of the year through September, shares of Ballard had risen a whopping 184%.

So what

Since the company didn't make any major announcements during the month, and there were no other significant events directly related to the company, it's difficult to find a clear explanation for the stock's rise. Nonetheless, there are two points worth noting -- two factors which, in conjunction with the market's general wave of bullish sentiment, could provide insight into the stock's performance.

Hydrogen fuel cells stacked next to the chemical formula for hydrogen gas.

Image source: Getty Images.

Early in the month, General Motors ( GM -1.24% ) announced its plan to launch at least 20 new all-electric vehicles by 2023. According to the company, the all-electric fleet will include "battery electric and hydrogen fuel cell electric depending on the unique requirements." Illustrating its fandom of fuel-cell technology even further, GM introduced SURUS, a fuel cell powered vehicle on a heavy truck frame that could be used as a truck or ambulance. GM is partnering with Honda ( HMC -1.40% ) to bring the fuel-cell vehicles to market, but Ballard's investors were likely encouraged by the news that fuel-cell vehicles were gaining market acceptance. In fact, investors were also likely encouraged by a mid-October announcement from Toyota ( TM -2.54% ) that revealed it would soon begin a feasibility study to explore the use of fuel-cell technology in heavy duty applications.

Unlike fuel cell peer, Plug Power ( PLUG 0.30% ), which primarily deals in the material handling equipment market, Ballard has made a concerted effort to gain market share among fuel cell vehicle manufacturers. In fiscal year 2016, for example, the heavy-duty motive segment -- addressing the bus and heavy-duty truck markets -- accounted for 36% of the company's top line. Granted, the segment primarily reflects sales in the Chinese market, but investors may sense that an opportunity is emerging for Ballard in the North American market.

Besides announcements from the car maker, anticipation of the company's third-quarter earnings report could have been a reason why shares rose. Through the first six months of fiscal year 2017, Ballard has reported a 46% increase in revenue over the same period last year. Besides the top-line growth, there are other encouraging signs -- like gross margin expansion -- that Ballard is nearing profitability, a feat largely unfamiliar among fuel-cell companies.

Now what

Announcements from GM and Toyota may seem like dubious explanations for the rise in Ballard's stock last month, but it seems foolish to dismiss this as a coincidence. Even though the North American automotive market has been reluctant to fully embrace fuel-cell solutions, China is throttling ahead, and Ballard is benefiting. For Ballard's investors, moreover, the announcements from GM and Toyota may inspire hope that the domestic market may not be completely averse to hydrogen-based solutions.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Ballard Power Systems Inc. Stock Quote
Ballard Power Systems Inc.
$14.43 (0.95%) $0.14
Toyota Motor Corporation Stock Quote
Toyota Motor Corporation
$182.67 (-2.54%) $-4.77
General Motors Company Stock Quote
General Motors Company
$60.77 (-1.24%) $0.77
Honda Motor Co., Ltd. Stock Quote
Honda Motor Co., Ltd.
$28.48 (-1.40%) $0.41
Plug Power Inc. Stock Quote
Plug Power Inc.
$36.53 (0.30%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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