Why Ballard Power Systems Inc. Surged 54% Higher Last Month

By Markets Fool.com

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What: Shares of fuel cell company Ballard Power Systems Inc. (NASDAQ: BLDP) jumped a whopping 54% in July after the company signed a key supply deal.

So what: The biggest news item of the month was a deal with Guangdong Nation Synergy Hydrogen Power Technology to create a joint venture to make fuel cell stacks in China. There's an $18.4 million payment scheduled for a technology transfer, and then a $150 million "take or pay" agreement to supply membrane electrode assemblies to the venture over the next five years.

Zhongshan Broad-Ocean Motor also agreed to a strategic collaboration deal and invested $28.3 million for a 9.9% stake in Ballard Power during July.

Now what: Amid the excitement over deals announced in China, Ballard Power Systems also announced a $5.8 million loss in the second quarter of 2016. And therein lies the challenge for investors in this space. The hydrogen market seems like a huge opportunity, but it's been marred by losses across the industry. And until that changes, I think it's too high risk for investors to be jumping in. Energy technology is tough business, and we still have no idea when hydrogen may reach a tipping point and become a big source of energy around the world.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.