Time To Worry? Analysts Just Downgraded Their Ballard Power Systems Inc. (TSE:BLDP) Outlook

Today is shaping up negative for Ballard Power Systems Inc. (TSE:BLDP) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Shares are up 6.6% to CA$7.38 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After this downgrade, Ballard Power Systems' 22 analysts are now forecasting revenues of US$102m in 2023. This would be a substantial 22% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 12% from last year to US$0.51. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$117m and losses of US$0.51 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also making no real change to the loss per share numbers.

View our latest analysis for Ballard Power Systems

The consensus price target fell 5.3% to US$5.30, with the analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Ballard Power Systems at US$11.78 per share, while the most bearish prices it at US$4.97. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Ballard Power Systems is forecast to grow faster in the future than it has in the past, with revenues expected to display 22% annualised growth until the end of 2023. If achieved, this would be a much better result than the 2.8% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 37% annually for the foreseeable future. So although Ballard Power Systems' revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Ballard Power Systems' revenues are expected to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Ballard Power Systems after today.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Ballard Power Systems going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.