Ballard Power: Investor Day Focuses on Cost Reduction, Order Growth; Shares Fairly Valued

We trim our fair value estimate for no-moat Ballard Power BLDP to $5 (CAD 6.50) per share from $6 (CAD 8) following its investor day. The primary drivers of our decreased valuation are a reduction to our long-term gross margin forecast and terminal multiple assumption. We view shares as fairly valued at current prices.

The event largely reinforced our prior thinking, while providing more detail behind the company’s long-term financial expectations. In the near term, Ballard remains focused on two activities—product cost reduction and securing platform wins—as profitability remains longer-dated. Cost reduction efforts appear largely on track, with Ballard expecting an 80% reduction in its fuel cell stack costs from 2018-26. With regards to commercial progress, we appreciated the company attempting to size its 2030 total addressable market and expected market share. Ballard estimates its 2030 total addressable market to be approximately $16 billion and expects its overall market share to be roughly 10%-15%, with variations depending on end segment.

Ballard’s long-term revenue framework largely corroborates our prior expectations. The main update to our valuation model is a reduction to our long-term gross margin expectations to more closely align with the company’s 2030 target of 25% (modestly below our prior assumptions). We view Ballard’s expectations as reasonable in light of increased competition within fuel cells, including from incumbents such as Cummins and Bosch.

Ballard’s timeline for achieving positive adjusted EBITDA aligns with our prior thinking in the back half of this decade (2028 timeframe). Given profitability remains far off, the company highlighted various capital efficiency initiatives, including streamlining its product portfolio and reviewing its manufacturing commitments. We estimate the company’s $864 million cash position gives it sufficient runway for the next 3-4 years before potentially needing to raise additional capital.