No. of Recommendations: 0

To summarize, Westport Innovation’s current valuation has diverged significantly from its intrinsic valuation based on both current and forward business fundamentals and metrics. With the market ascribing tremendous value to the Heavy Duty segment as if the growth in this segment and associated revenue capture by the Company was a “done deal”, the margin of safety is non-existent at current levels.

With an increasing number of the established diesel engine manufacturers putting forward strategies for natural gas engines, the demise of Westport Innovations is not an “if” but “when” situation. In the meantime, the Company continues to burn approximately $100M in cash per year with a continued ramp in its opex indicating the lack of operating leverage in its business model.

Note that timing of the short to play out is difficult to predict but we are certain that the underlying fundamentals of the business have begun to rapidly deteriorate as evidenced by their recently announced quarter. Given that ~38% of the float is sold short, we would encourage investors to size positions accordingly.
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