Last Update 18 Dec 25

BLDP: Softer Order Backlog Will Likely Outweigh Near-Term Margin Surprise

Analysts have modestly raised their price targets on Ballard Power Systems into the roughly $2.50 to $3.40 per share range, up from prior levels closer to $1.00 to $2.00. They cite stronger than expected margins, improving long term sector dynamics, and early benefits from management's strategic actions, even as they await clearer visibility on sustained growth and backlog recovery.

Analyst Commentary

Street commentary on Ballard Power Systems reflects a cautiously constructive stance, with higher price targets anchored in better near term execution but tempered by concerns over the durability of growth and backlog trends.

Bullish Takeaways

Bullish analysts highlight Q3 revenue and gross margins coming in well above expectations, supporting a higher valuation framework despite ongoing losses.
The surprise 15% gross margin in Q3, even if partially driven by one time factors, is viewed as evidence that the business model can scale toward more sustainable profitability.
Improving margin outlook into 2026, particularly in core bus and rail segments that represent over 70% of the mix, underpins the move to higher price targets in the $2.50 to $3.40 range.
Some see a supportive macro backdrop for clean tech, citing the potential start of a new sector cycle underpinned by falling interest rates, more realistic growth assumptions, and a more rational policy environment.

Bearish Takeaways

Bearish analysts maintain cautious ratings, arguing that the recent margin strength relies too heavily on one time benefits to justify a sustained rerating of the shares.
Soft bookings and a decline in the 12 month order book raise questions about near term growth visibility and the timing of a more robust demand recovery.
Despite progress on strategy, visibility into a durable rebound in backlog and consistent revenue growth remains limited, constraining upside to current valuation.
Some caution that the sector level upcycle narrative still faces headline risk from changing policy priorities in Washington, which could pressure both sentiment and capital deployment into hydrogen fuel cell projects.

What's in the News

Reaffirmed 2025 earnings guidance and maintained expectations that revenue will be weighted toward the second half of the year (Company guidance)

Valuation Changes

The fair value estimate has been maintained at approximately CA$1.75 per share, with no change from the prior model.
The discount rate has fallen slightly, from about 8.09 percent to 8.04 percent, implying a modestly lower required return.
The revenue growth forecast remains effectively unchanged, holding at roughly 21.3 percent annually in the updated assumptions.
The net profit margin outlook has been trimmed slightly, from about 9.09 percent to 8.63 percent, reflecting a more conservative profitability path.
The future P/E multiple has risen modestly, from roughly 32.8 times to 35.0 times, indicating a somewhat higher valuation on expected earnings.

Investor optimism about hydrogen adoption and policy support may be overstating revenue growth prospects amid uneven market development and delayed large-scale orders.
Anticipated margin and earnings improvements rely on unproven cost initiatives, while execution risks and competitive threats could undermine the company's long-term profitability.
Growing commercial traction, operational improvements, product innovation, robust financial position, and supportive decarbonization trends position Ballard for long-term growth amid market volatility.

Catalysts

About Ballard Power Systems

Engages in the design, development, manufacture, sale, and service of proton exchange membrane (PEM) fuel cell products.What are the underlying business or industry changes driving this perspective?

Ballard's high valuation may reflect investor optimism that accelerating global investment in hydrogen infrastructure and supportive policy mandates will rapidly expand hydrogen adoption in transit, rail, and marine sectors, boosting the company's future revenue growth.
The expectation that regulatory drivers and net-zero commitments will translate into major new orders as fuel cell technology gains commercial traction in heavy-duty mobility may be inflating anticipated revenue and backlog growth, despite currently uneven adoption and delayed market development.
Investors appear to be pricing in significant future improvements in gross margins and net earnings, driven by the company's cost reduction initiatives (automation, restructuring, manufacturing efficiency), before these margin gains are actually realized or fully proven at commercial scale.
The company's reprioritization towards near-term markets and restructuring to achieve positive cash flow by 2027 are being interpreted as catalysts for operational discipline and eventual profitability, potentially overlooking execution risks and ongoing market uncertainties that could persistently pressure margins and slow path to earnings growth.
Ballard's perceived first-mover advantage, global brand, and expanding technology/IP portfolio may be fostering overconfidence in its long-term competitive moat and pricing power, despite the risk of further technological advances in batteries, intensifying competition, and supply chain/demand volatility-all factors that could threaten both margins and sustainable revenue expansion.

Ballard Power Systems Earnings and Revenue Growth

Ballard Power Systems Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Ballard Power Systems's revenue will grow by 30.2% annually over the next 3 years.
Analysts are not forecasting that Ballard Power Systems will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Ballard Power Systems's profit margin will increase from -408.7% to the average US Electrical industry of 9.2% in 3 years.
If Ballard Power Systems's profit margin were to converge on the industry average, you could expect earnings to reach $14.6 million (and earnings per share of $0.05) by about September 2028, up from $-296.3 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 30.5x on those 2028 earnings, up from -1.9x today. This future PE is greater than the current PE for the US Electrical industry at 17.8x.
Analysts expect the number of shares outstanding to grow by 0.39% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.72%, as per the Simply Wall St company report.

Ballard Power Systems Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ballard's technology and product offerings are showing increased commercial traction in multiple verticals (bus, rail, marine, and material handling), and the company's strong historical experience (over 300 million kilometers of fuel cell operation) and brand reputation provide it with a durable competitive advantage-supporting potential for long-term revenue growth despite short-term market headwinds.
Ongoing investments in automated manufacturing (e.g., Project Forge for high-volume bipolar plate production) and disciplined cost control are driving significant gross margin improvements (24-point YoY increase in Q2 2025), with management targeting further operating expense reductions and positive cash flow exiting 2027-indicating a credible pathway to profitability and earnings growth.
Ballard continues to advance product innovation, particularly around fuel cell stack durability and total cost of ownership, which its customers value across different verticals; this focus on differentiated product performance and value pricing can drive better pricing power, enhanced margins, and increased customer loyalty.
Significant cash reserves ($550 million, no bank debt) and a reduced cost base from recent restructurings allow Ballard to weather market volatility, invest in strategic initiatives, and avoid near-term equity dilution, supporting financial stability and strategic flexibility for future revenue and net margin expansion.
Secular trends such as global decarbonization mandates, electrification of transportation (with hydrogen fuel cells gaining favor in heavy-duty fleets where BEVs face scaling challenges), and investment in hydrogen infrastructure are providing supportive tailwinds that can meaningfully expand Ballard's addressable market, driving long-term revenue and earnings potential.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of CA$1.624 for Ballard Power Systems based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$2.0, and the most bearish reporting a price target of just CA$1.38.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $160.0 million, earnings will come to $14.6 million, and it would be trading on a PE ratio of 30.5x, assuming you use a discount rate of 7.7%.
Given the current share price of CA$2.63, the analyst price target of CA$1.62 is 62.0% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

BLDP: Prolonged Hydrogen Market Downturn Will Challenge Cash Flow Path Into 2027