Westport Innovations (WPRT) Is a Double; Lake Street Capital Markets Starts at 'Buy'

January 8, 2013 12:57 PM EST
Get Alerts WPRT Hot Sheet
Price: $1.15 -1.71%

Rating Summary:
    8 Buy, 14 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Lake Street Capital Markets' analyst Robert Brown (formerly with Craig-Hallum) initiated coverage on Westport Innovations (NASDAQ: WPRT) Tuesday with a Buy rating and $54 price target, suggesting a near double from current levels.

Brown said partnerships with engine OEM's like Cummins, Volvo, Weichai and Caterpillar, its technology advantage with HPDI, and a new engine launching in 2013, all position the company benefit from the shift to natural gas from diesel fuel in the transportation industry. He estimates the company can become a $2 billion revenue company generating over $420 million in annual EBITDA by 2018.

Commenting on the shift from diesel to natural gas, Brown said it is underway and has historical precedent. The analyst note that between 1977 and 2002, the Class 3-8 commercial truck market saw the virtual elimination of gasoline as a fuel source due to increasing gasoline prices, a comparative advantage for higher-efficiency / lower-cost diesel engines, and regulatory changes. "Over this period, the Class 8 truck segment went from 65% diesel to 97% diesel and the Class 3-7 segments collectively went from 11% to 73% diesel. (Source: Argonne National Laboratory, Analysis of Major Truck Trends in U.S. Commercial Trucking, 1977-2002)," Brown states. "We believe a number of comparable factors are converging to drive a similar shift over the next several years."

Brown also notes that major adoption in the refuse market is a indication of what can happen in the much-larger regional / 18-wheel truck market where penetrations rates are low. "The penetration rate of natural gas trucks in the refuse market is expected to be roughly 40% in 2012, up from 20% in 2011 and 3% in 2008," he notes. In addition, the new 12-liter engine is a game-change, with 2013 production sold-old.

For an analyst ratings summary and ratings history on Westport Innovations click here. For more ratings news on Westport Innovations click here.

Shares of Westport Innovations are down 3.7 percent to $27.25.

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