Penny stocks have a long history of delivering explosive returns… and equally explosive crashes. And ITM Power (LSE:ITM) shareholders have experienced both sides of this story first-hand.
As green energy excitement gripped the markets in 2021, this hydrogen penny stock surged to stellar highs, driven by its promising electrolyser technology. But then came the reality check. Production ramp-up struggles, mounting losses, and fading government support sent the stock back to earth with a thud.
But something’s changed. Over the last 12 months, ITM Power has skyrocketed by a staggering 265%! So is this just another temporary surge? Or is ITM just getting started?
What’s driving the rally?
As a quick crash course, ITM Power designs and manufactures hydrogen electrolysers. These machines split water into hydrogen and oxygen using electricity. And as the world races to decarbonise heavy industry, green hydrogen is increasingly seen as one of the few viable solutions for sectors like steel, chemicals, and long-haul transport that simply can’t run on batteries alone.
In 2021, ITM’s surge was driven almost entirely by hype and excitement. This time, the momentum stems from tangible financial results. The company reported a record £18m in first-half revenue for fiscal 2026 (ending in April) and even raised full-year guidance to between £40m and £43m, signalling an incoming 35% year-on-year jump.
What’s more, Great British Energy has injected £40m of equity as part of an £86.5m government-backed funding package. And a new collaboration with Rheinmetall for the Giga PtX project opens a strategic door into Europe’s defence sector.
And later this month, the hydrogen stock will join the MSCI UK Small Cap Index, triggering another round of buying activity from investment funds – a catalyst that’s just a few short days away.
So far, this all makes ITM Power seem like a no-brainer. So what could go wrong?
Are the risks worth taking?
Despite the improving trajectory of this business, there are some important caveats for investors to carefully consider.
ITM Power is still losing money. And the path to profitability is far from guaranteed. In fact, analysts at Morgan Stanley, who are among the most bullish institutional followers, don’t foresee any underlying earnings until 2028. And even that’s dependent on flawless execution over the next two years.
Given that bad execution is what caused ITM shares to tumble during the last surge, opinions from other institutional investors are decidedly mixed, with seven active Buy recommendations, three Hold, and two Sell.
For investors who believe management’s learned from its previous mistakes, ITM Power could indeed be among the most genuinely interesting growth stories in the market right now.
But there’s no denying that this is emphatically not a stock for the faint-hearted. Even though ITM Power is no longer a penny stock, position sizing and staying within personal risk tolerance remain crucial.
Personally, this is a business I’m watching carefully as it continues to evolve. And while I’m not quite ready to pull the trigger, investors with a higher risk tolerance may want to consider taking a closer look.
Should you invest £5,000 in Itm Power Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Itm Power Plc made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
