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Why Shares of Ballard Power Systems Fell 14.5% in March

By John Bromels - Apr 9, 2020 at 9:10AM

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When oil gets cheap, fuel cells struggle to compete.

What happened

Shares of hydrogen fuel cell specialist Ballard Power Systems (BLDP -1.39%) tumbled 14.5% in March, according to data provided by S&P Global Market Intelligence. That was slightly worse than the overall S&P 500, which was down 12.5% for the month. But it was much better than peers Plug Power (down 18.4%) and Bloom Energy (down 42.4%).

A man ducks beneath a chalk arrow, drawn to look as though it is breaking.

Image source: Getty Images.

So what

Even though Ballard isn't an oil company, the stock market punished its shares after oil prices plunged on March 6. Between March 6 and March 9, the stock fell 12.6%, along with companies across the energy industry, as Wall Street digested the impact of sharply lower oil prices. 

Ballard is currently a niche manufacturer of fuel cell technology for "heavy-duty motile applications," which in plain English means buses, trucks, streetcars, and the like. It's also consistently unprofitable: The company has never posted a profit (quarterly or annual) in the last five years. In order for Ballard to succeed, it needs to see more-widespread adoption of its fuel cells in heavy-duty motile applications. 

That's easier to do when oil is expensive, because that's when conventional gasoline and diesel fuel are expensive as well. Potential customers may want to adopt fuel cell technology because it's the "right thing" to do, but there's only so far they'll go in taking a hit to their bottom lines to make that conversion. When gas is cheap, it's harder to justify taking a leap of faith on a technology that promises to be more expensive.

Now what

Ballard is a speculative stock that's full of "potential," but has made very little headway in widespread adoption of its technology. Meanwhile, its stock has been incredibly volatile, with frequent double-digit percentage swings in both directions. Cheap oil isn't going to help it achieve its goals. This is a stock investors should probably steer clear of unless they have a tremendous appetite for risk and a firm belief that fuel cells will catch on sooner rather than later.

John Bromels has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Ballard Power Systems Inc. Stock Quote
Ballard Power Systems Inc.
BLDP
$8.85 (-1.39%) $0.12
Plug Power Inc. Stock Quote
Plug Power Inc.
PLUG
$30.65 (3.77%) $1.11
Bloom Energy Corporation Stock Quote
Bloom Energy Corporation
BE
$31.03 (1.87%) $0.57

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

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