Two decades ago, a burst in the dot-com bubble meant that shares of Ballard Power Systems may have been dead in the water. Now, it’s rebounding with a vengeance.

After a meteoric rise that saw the hydrogen fuel-cell company’s stock surge more than 400% between late 1999 and March 2000, it crashed almost immediately after, falling 88% over the next 18 months.

Fast-forward 20 years and the Burnaby, British Columbia-based company is one of the best-performing stocks in Canada this year with a gain of 117%. That’s not far off the 154% jump in shares of Shopify, a darling of the tech industry.

“There’s a lot of momentum behind it,” Cormark Securities analyst MacMurray Whale said in an interview. In the years since Ballard’s sudden boom and bust, it launched a joint venture with Weichai Power in China in 2018 and has directed its focus away from passenger cars and toward electrifying medium- and heavy-duty vehicles such as buses and transport trucks.

“This is all about China,” Whale said.

Guy McAree, director of investor relations and marketing at Ballard, said the decision to focus on buses and trucks was driven by the fact that “those are the vehicles that have a disproportionate impact on the environment.”

The firm received almost 32% of its 2018 revenues from China, according to data compiled by Bloomberg. Earlier this month, the stock rallied to a 17-year high after it received a $7.7 million order from its joint venture. The company’s technology currently powers over 650 electric buses and more than 2 200 electric trucks in the world’s second-largest economy, Alfred Wong, managing director at Ballard, said in a statement then.

Cormark’s Whale also credited Ballard’s recent rally with the growing popularity of electric vehicles, pointing to Tesla’s 300% surge from its March low. “I think Tesla has shown that you can make a better margin than the normal vehicle,” he said. Whale has a buy recommendation on Ballard’s stock with a C$35 price target.

Ballard’s shares still have a lot of ground to cover. Unlike the early 2000s, when the stock reached a pinnacle of C$192, its closing price on Tuesday was C$20.13.

TECH BUBBLE EUPHORIA
Whale, who covered Ballard two decades ago for National Bank Financial, said the rise and fall at the turn of the millennium is partly attributable to the “euphoria” surrounding the dot-com bubble.

“Ballard got caught up in that and they couldn’t deliver because it was technically too hard to do in the time-frame they had set themselves,” he said. “It was too early.” The company was not yet focused on heavy-duty vehicles, which has since become its niche.

According to McAree, there has since been a “tremendous” improvement in the performance of fuel-cell products and a reduction in the cost of building them. “I don’t have a crystal ball, but we do think that people are seeing the value,” he said.

Ballard has six buy recommendations, three holds and no sell ratings, with an average price target of C$26, according to data compiled by Bloomberg.

SOME CAUTION
Not everyone is bullish. Just last week, New York-based hedge fund Lakewood Capital called Ballard a “consistently loss-making and cash-burning Canadian company” in a letter.

“We have tracked Ballard Power (and several other fuel cell stocks) for the past decade, and on five separate occasions, investors bid up the shares in a frenzy only to be left holding the bag months later when they came crashing down to earth,” the hedge fund said.

Whale also preached a bit of caution, saying everything “could change on a dime.”

“If there’s no follow-on order after hydrogen programs were announced, or that follow-on order isn’t very interesting, then the stock goes down,” Whale said. “It’s as simple as that.”