Shares of the Vancouver-based company, which makes alternative fuel systems and components, rose by as much as 13 per cent in Friday trading on both the Toronto Stock Exchange and the Nasdaq. The stock was up 29 cents to $3.43 on the TSX mid-day and up 21 US cents to US$2.60 on the Nasdaq. Westport’s stock is up about 38 per cent on the TSX over the past five days and has increased by about 34 per cent on the Nasdaq over the same period. It’s roughly flat over the past year on both exchanges.
Many renewable and clean energy stocks are up this week as investors appear buoyed by the industry’s prospects now that Joe Biden has been declared President-elect of the United States. His campaign included promises to boost spending on renewable and clean energy initiatives. Also, the International Energy Agency released a report this week citing record growth in renewable power.
On Monday, Westport — which supplies fuel systems for low-carbon fuels like natural gas, renewable gas propane and hydrogen to the global auto industry — reported third-quarter revenue of US$65.4-million, down 13 per cent year-over-year but well past expectations of $45.3-million. Net income was US$0.8 million or a penny US per share compared to net of US4.9-million or 4 cents US a year earlier. Analysts were expecting a loss of 4 cent US per share in the quarter ended Sept. 30.
Lake Street Capital Markets analyst Robert Brown said Westport’s latest quarter included growth from the Volvo HPDI (high-pressure direct injection) business in Europe, which offset continued weakness in the automotive aftermarket segment.
“Westport has made strong progress re-starting operations in Italy and improving liquidity and we are encouraged to see traction in HPDI,” Mr. Brown said in a Nov. 10 note. He has a “buy” and US$4 target on the stock.
“We believe Westport is in a strong market position and is well along in its recovery,” Mr. Brown wrote, adding that he believes the next catalyst for the company is the full certification of a vehicle using the Weichai HPDI engine. “We are optimistic this can happen in early 2021,” he said.
Craig-Hallum Capital Group analyst Eric Stine said in a Nov. 11 note that Westport’s latest earnings brought “another sigh of relief after being severely impacted by COVID-19.”
“It should bring significant confidence in the underlying fundamentals of its gaseous fuel offering across light, medium and heavy-duty applications, and also in the strength of the market tailwind and movement to decarbonize transportation,” said Mr. Stine, who has a “buy” and US$7 price target on the stock.
He also said the third quarter shows the company has a solid balance sheet “due in part to liquidity steps taken since the onset of the pandemic (and now including an ATM [at-the-market] offering if needed for HPDI ramp).”
Westport announced on Monday an ATM offering program allowing it to issue up to US$50-million at its discretion. It said the net proceeds would help fund the development of its HPDI technology “and capital investment to meet growing HPDI demand.”
Oppenheimer analyst Colin Rusch said the ATM won’t likely be a big source of capital, describing it in a Nov. 10 note as “primarily an insurance policy on liquidity rather than a critical source of capital. With much of its cash domiciled in the EU, we believe the instrument allows the company flexibility as it ramps HPDI 2.0 and looks to add additional customers.”
Mr. Rusch, who has an “outperform” (similar to buy) and US$3 target price on the stock, also believes the company’s “underlying long-term growth story is beginning to play out.” He’s encouraged by cost reductions and expect to see “incremental operating leverage as revenue scales.”
Cowen analyst Jeffrey Osborne reiterated his “market perform” (similar to hold) and US$2.50 target price after the latest earnings, noting that investors will be focused in the near term on its work with Weichai and progress with Volvo.
“We are constructive on the additional revenue diversity they can provide,” Mr. Osborne said in a Nov. 10 note. “Liquidity has been bolstered with the additional borrowings, principal deferrals, extension of convertible notes, and support from the government’s wage subsidy program. Lastly, given the prevailing low oil prices, we look for signs that fleet operators are continuing to transition to natural gas fuels.”
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