This is the quote from the bullish article about FC's: "If the regulatory incentives and key technical challenges are overcome by the active players sooner rather than later in the forecast period, ABI expects 2.4 million vehicles running on fuel cells, or 4.3% of all autos produced, in 2011"
Apparently, the numbers I used in my original analysis were way too bullish on BLDP.
One thing to note is that the numbers quoted in the article might be misleading. "4.3% of all autos produced, in 2011" means "4.3% of all autos produced in the one year 2011". And "2.4 million FC engines running on fuel cells" is the total of all FC's produced over all years. That 2.4 million number includes both cars and buses.
assumption 1: 1/3 of the 2.4 million FC vehicles on the road are actually produced in the year 2011. assumption 2: total # fuel cell vehicles produced per year = 2.4 / 3 = 800,000.
assumption 3: BLDP has 70% of auto fuel cell market This means BLDP sells 560,000 FC's that year
assumption 4: BLDP makes a 5% profit margin assumption 5: BLDP's portion of auto fuel cell system sells for $3000 in today's u.s. dollars. This is based on assumption that it must sell for $3000 or cheaper in order to compete with ICE.
This means that BLDP makes $3000 * 5% = $150 u.s. dollars per engine.
$150 per fc * 560,000 fc's = profit margin of $84 million
At this point, BLDP stock will grow about as fast as any other high cap stock, and enjoy a P.E. ratio of the average S&P company, which is a P.E. of 23.
P/E 23 * $84 million earnings = market cap of $1.9 billion.
Current market cap of BLDP stock is $4 billion.
So, based on these assumptions, if you stay invested in BLDP for the next 10 years, you will lose half your money. Even if BLDP's P/E ratio is double the stock market average, you will have broken even.
Are any of my numbers or calculations wrong? Are my assumptions too conservative? Which assumption is conservative? Is there something I'm missing? Is everyone just blind? Any stock analysts out there care to comment on the risk/reward of this investment?
P.S. I really do hate to do this, but BLDP might be the first stock I've ever decided to short. Shoot, my e*trade account isn't even enabled for options trading.
Thank-you for attempting to put pen to paper --to put some sort of projection on value.
I haven't had a chance to look at the numbers carefully, however, how many fuel cell stacks have you assumed will be sold for generators and residential units? The portable generator sales are expected to begin as early as the end of this year.