Did Wesport Innovations Finally Just Bottom?

24/7 Wall St. took a chance on Westport Innovations by naming it as one of nine stocks that could double in 2014. The call was made on February 1, 2014, when the stock was at $17.50, long after the serious drop from above $30.

The earnings release from Westport comes with a good news and bad news scenario. The good news is that the stock’s reaction was positive despite a poor earnings report. The bad news is that for Westport to now double, it is going to require a new fight in Washington to get policy changes going again for a much wider adoption of CNG fueled trucks on the highway system.

So, again, Westport could still double. Our view is that the chances of a doubling have no come way down in 2014. Maybe that takes place in 2015, or maybe in 2016, during election fever when politicians get more windbag rhetoric on developing a real U.S. energy policy.

We previously said:

2014 will be a “show me the money year” for Westport, as sales are expected to grow close to 40% to about $225 million after dropping by half to around $162 million (analyst estimate) in 2013.

Westport showed in its earnings report and forecast that it now expects revenues of only $175 million to $185 million for all of 2014, or growth of only about 7% to 13% over 2013.

That guidance is not good, but the stock is down only 2% at $16.55 after the earnings report. Trading volume was light at almost 1.2 million shares in mid-day trading, and the stock was actually halted with its earnings report.

Analysts have backed off the optimistic stance here after the report. Canaccord Genuity has a Hold rating and lowered the price target to $20 from $28. RBC Capital Markets has a Sector Perform rating and lowered its target to $23 from $27. Northland Securities has a Market Perform rating and lowered its target to $17 from $24.

Fortunately, Westport Innovations has put options out to January 2015 and January 2016 for those investors who want to ride this out or who want to stay under the belief that this can double.

Our final revisited view after earnings: Westport Innovations has tarnished its ability to double this year. It could still have significant upside if any improvements are made, and there can still be tremendous upside to a double or much more in the years ahead if major developments and trends work in its favor. 24/7 Wall St. remains optimistic, but we just cannot endorse the notion that Westport’s stock price will double in 2014, even if it seems like a scenario with more upside than downside.