Cowen and Company affirms Ballard Power Systems Inc. (Nasdaq: BLDP) at Market Perform with a price target of $2.75 following Q1 results reported Wednesday morning.

Analyst Jeffrey Osborne noted that Q1 was challenging for Ballard, but management continued to move focus to H2 and FY16. Management also noted "new Telecom initiatives in India and NYC, 39 bus deployments across China, Europe, and the U.S., and a focus on expanding its newly segmented Technology Solutions platform."

On the last part, Osborne commented, While we remain concerned with the broad potential of the Telecom Backup segment, we find the announcement of a 100 ElectraGen pilot program for RGIL in India and potential 400-500 unit follow up, to be promising. The final approval by the NYC Fire Department is also a good sign for end-market potential, though large-scale interest in Ballard's Telecom Backup solution offer remains untested. In the coming quarters we will be looking for commentary on pricing and margin in Telecom as difficult markets, such as India, gain focus. We expect more detail at the October Analyst Day in regards to product gross margin trajectory.

Looking ahead, Osborne offered the following outlook: While we see many potentially positive events on the horizon, these developments are likely to take shape in 2H 2015 and FY 2016. It is with that in mind that we are taking a wait and see approach on shares of BLDP, and reiterate our market perform rating. As management executes on its initiatives over the next 18 months we believe fundamentals could meaningfully improve and signal new growth prospects for the company.

We are adjusting Ballard’s 2016 EV/Sales multiple from 3x - 3.5x to 3.5x - 4x. This multiple better aligns and reflects Ballard’s underlying business as it relates to its peer group. In addition, we believe we are at a trough currently and the bus order backlog suggests a steep GM expansion trend in the coming quarters which should act as a tailwind to investor sentiment. In light of our new 2016 revenues estimate of $92.2 million and refined multiple, we will be maintaining our price target of $2.75.

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