Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of fuel cell maker Ballard Power Systems (NASDAQ:BLDP) rose by as much as 15% today on news that the company had signed two technology solutions contracts. The stock ended the trading day up about 7.9% from the previous close.
So what: The two deals signed today, basically research and development contracts, largely continue Ballard's present work. The first contract is with Ardica, a company focused on building small, portable energy storage options for the military. This contract is an extension of existing work with Ardica to reduce the costs of small-scale proton exchange membrane fuel cells. The second contract is an extension with an undisclosed automotive OEM to further develop fuel cells for use in automotive and transport industries.
While it's nice Ballard will continue to work with these customers, it's hardly enough to move the needle for the company. These deals are more a sign that sales won't dwindle than a signal that Ballard will increase sales anytime soon.
Now what: Little nuggets of promise keep leaking from the world of fuel cells via announcements of contracts to further research or to deploy fuel cells in certain applications. However, fuel cell companies themselves have yet to really get a strong toehold and start on the climb to profitability. Today's deals don't necessarily put Ballard any closer to that goal, but its gross margins have been the strongest among its fuel cell peers and it is likely the closest to breaking even on an EBITDA basis.
Ballard and all the other companies in the industry are likely to remain extremely volatile stocks that move on even the slightest news announcement. Until any of these companies can develop a solid, reliable sales foundation from which to become profitable enterprises, investors might want to either stay on the sidelines or at least keep portfolio exposure to fuel cell stocks to a minimum.
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