Shares in Ballard Power Systems soared 22 per cent yesterday. Why? Because George W. Bush, a man who doesn’t know squat about hydrogen fuel cells and the challenges of a hydrogen economy, makes a speech that — once again — says hydrogen-powered vehicles are an attainable goal. “I strongly believe hydrogen is the fuel of the future,” he said during his weekend Earth Day speech.

Ballard shares have roughly doubled over the past months on this re-emerging belief, this newfound confidence, in the hydrogen economy. I think hydrogen and fuel cells are going to play an important role over the coming decades, but I’m not convinced they will transform the transportation world and that we’ll all be driving fuel-cell cars — at least not within the next 20 or 30 years. There are too many other great, cheaper alternatives coming onstream, and there are too many barriers — cost, infrastructure, storage — that continue to hold back the potential of fuel cells. These barriers will be overcome over time, but investors don’t tend to be the patient type. Which leads me to believe it’s retail, not institutional investors, that are driving this Ballard share frenzy.

Remember, this is a company with a market cap of $1.4 billion that had revenues of $54 million last year and isn’t expected to be profitable until after 2010.

What’s more mindboggling is Ballard’s skyrocketing stock seems to be happening in isolation, despite the fact that rising fossil fuel prices and global warming fears should be driving the entire sector. We’re not seeing the same degree of lift with Hydrogenics Inc., which is arguably better positioned to take advantage of near- and medium-term hydrogen opportunities. After Bush’s speech, we’re also not seeing the same kind of enthusiasm for other alternative energy or technology companies, from Xantrex to VRB Power to Carmanah Technologies. (Though you could argue the last two, like Ballard, are already overvalued)

Today, institutional investors struck back — issuing downgrades that pulled Ballard’s shares back by 13 per cent. At least someone hasn’t lost their marbles.

This entry was posted on Tuesday, April 25th, 2006 at 11:19 am and is filed under Main Page. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.