The following article was originally published on November 26, 2018… we are re-posting it because of a slew of new questions about this ad, which is again circulating. The ad is unchanged from November, it appears, and the following article is also unchanged (the financial expectations are now a little worse than they were late last year, but the stock is now up a bit).
The ad that caught my eye this morning was for Keith Kohl’s Energy Investor… who wouldn’t want to daydream about 1,587% gains while they’re planning their holiday shopping? Maybe we can get a Rolex for each kid! Everyone gets a new car! Woohoo!
Ahem. Sorry. Got a little ahead of myself. What is it that Kohl is pitching? Here’s a taste fo the ad:
“Harnessing Hydrogen for 1,587% Gains
“The biggest opportunity in this market is simple.
“The top company that mass-produces the engines that run on hydrogen stands to make an absolute fortune.
“And this tiny manufacturing company has already partnered with the U.S. military and several top Fortune 500 companies to achieve that end.
“It’s working with Royal Caribbean Cruises on futuristic new cruise ship engines.
“The U.S. Navy has commissioned the company to develop 13 new propulsion systems for its drones.
“The U.S. Army recently ordered $1 million worth of mobile power packs from it.
“It’s signed a $9 million contract with Siemens to develop a hydrogen-powered train.”
OK, so that’s a pretty nice plateful of clues… which I certainly appreciate, coming back to work after some holiday lollygagging.
I do like to be a bit greedy when it comes to clues, though… anything else I can feed to the Thinkolator to make sure we get the right answer?
He talks a lot about the fact that even oil companies have invested in this “new” energy source, something they’ve been reluctant to do in the past with battery and solar and etc….
“Exxon calls this fuel source ‘a game changer.’
“And Shell joined an international partnership that’s investing $10.7 billion into this new energy.
“Big Oil has never invested this kind of money in green technology before.
“It’s no longer a question of ‘will hydrogen catch on?’ but, rather, ‘how massive will it be?'”
That’s not true, of course — there’s still essentially no hydrogen fueling infrastructure in the United States outside of California, and there have been fuel cell cars and other products available for a decade or more without generating much consumer interest. The first commercial-scale consumer hydrogen fuel cell car came out five years ago, and they’re still available in just small test locations, mostly in California, which has the goal of getting to 200 hydrogen fueling stations by 2025… which sounds impressive, but by way of comparison there are 8,000 gas stations in California, and about 200 Tesla Supercharger locations either built or planned (not counting “destination” and home chargers… “at home” hydrogen fueling seems unlikely).
Still, hydrogen fuel cell cars have a huge amount of appeal — potentially as convenient to fuel as gasoline cars, no emissions, possible to create hydrogen out of water if you have enough electricity available (which can be solar in some places), and the modern fuel cell cars effectively act the same as battery electric cars, since the fuel cell just creates electricity to run the electric motors (so they have the potential of being simpler and lower-maintenance than gasoline cars).
Just be careful about assuming inevitability… someone’s got to build those refueling stations, and there aren’t many Elon Musk’s out there who are willing or able to do it as a massive investment to spur hydrogen fuel cell adoption. Definitely possible, but it will take a lot of money from the government to push things forward with any speed. It really tool Musk’s promotional whiz-bangery and the appeal to luxury-loving wealthy liberal Calfornians to get Tesla over the hump to be taken somewhat seriously, following lots of electric car failures, so what will it take to get hydrogen fuel cells up to speed? Will battery recharging advance fast enough to make fuel cells unappealing over the next 5-10 years? I don’t know.
And then, finally, another hint dropped about the specific company he likes:
“With a market cap of slightly under a billion dollars, it wouldn’t take much for its stock to jump five times, 10 times, or even 15 times its current price!”
He throws out some past examples of “hydrogen stocks” that have spiked and given investors good quick gains — Fuel Cell Energy and Plug Power in 2000, and AFC Energy in 2011… so are those kinds of gains on offer again here?
Well, 1,587% gains would certainly require a huge stretch of the imagination… but this stock has spiked in the past on fuel cell “story” excitement, with bumps that rivaled those Plug Power and Fuel Cell Energy price spikes — including a run from about 50 cents to over $4 a share about five years ago. This is, sez the Thinkolator, Ballard Power Systems (BLDP).
And no, it’s not “slightly under a billion dollars” anymore — though it was a couple months ago. It’s got a market cap of about $500 million now.
Ballard Power has been around for about 25 years, and has never gotten onto a sustained trend of rising revenues for more than a couple years (though 2017 was their best year for sales, just barely eclipsing 2003), and they’ve never been profitable… though last year they got pretty close to break-even. Their last quarter was mildly disappointing in comparison to analyst expectations, and included “below consensus guidance,” so the stock has performed poorly during the recent market weakness — it peaked at about $4.50 back in September but dropped with all the other small “growth” stocks (they’re not growing, but they’re not profitable either… and the only reason to buy the stock is if you imagine it will grow, and we have to call it something), then dropped again on the weak earnings report, and here we sit below $3 a share.
Where’s it going? I don’t know. They do have all those teased agreements and projects in place the navy contracts for drones and the experimental cruise ship systems (with ABB) for Royal Caribbean, and an experimental commuter train system with Siemens, and maybe some of these will become commercial-scale projects eventually… but there doesn’t appear to be any urgency. Analysts expect them to finish 2018 with revenue about 25% below 2017’s results, and to grow after that but still only have $100 million in revenue in 2019 and $137 million in 2020, when they anticipate Ballard reporting a profit for the first time (1 cent per share… but you gotta start somewhere).
They are not in any financial danger, they did just get a bit equity investment from Weichai Power of about $164 million, selling them 19.9% of the company at $3.54 per share — and another of their Chinese investors ponied up $20 million to keep its 9.9% ownership share, so they have plenty of cash.
You can get a basic idea of the current operating metrics from their third quarter presentation — but, as you can imagine from the stock price’s move over the past couple months, the numbers are not good. This is a story stock, not an investment based on established financial performance, so you’d have to believe in the story and have some taste for risk to want to own it… and unless there’s some huge “spike” coming from another mania over hydrogen fuel cells, which is possible but not particularly predictable, then you’ll probably have to be quite patient as you wait to see whether Ballard’s longstanding technology story in clean energy can become a viable business.
So… you’ll have to decide where you come down: Yay, hydrogen fuel cells will be huge? Nay, I’ll wait for them to get some orders? Watch and wait? I’m perhaps a bit extra-cynical after seeing a few previous generations of fuel cell stocks crash and burn, so I’ll try to check in on Ballard every now and then but I’m not willing to risk my money on them today.
Your mileage may vary, of course, so make your call — and please do share your thoughts with us, since that makes us all a wee bit wiser… just use the happy little comment box below, thanks for reading!