ITM Power (LSE: ITM) shares have been booming. The share price in the clean energy company is up 235% since March of this year. Its forward-thinking green technology is looking more like a practical and useful invention by the day. Governments and corporations have been pouring investment in, and buyers are flooding into the stock too.
But it’s a bit of a curious case. The stock has been racing higher thanks to a bevy of positive factors. But the share price is still down 69% from its peak. What’s going on here? And is this a chance get in while the going’s cheap?
What happened?
The key to understanding why ITM Power is still lagging behind all-time highs is partly one of timing. The previous high was hit in early 2021 when the world was a very different place.
Low interest rates are one massive factor. The availability of cheap money made investment a more attractive proposition back then. That meant a speculative green-energy firm like ITM could raise cash with less risk.
Another problem was the increase in energy costs in the years after.
And an important point to make is the nature of the technology. The tech that ITM Power develops – called hydrolysers – takes renewable electricity and turns it into ‘green hydrogen’ where it can be stored or repurposed. This is new technology sp there’s execution riskthat might put off some investors.
Time to buy?
Here’s the other side of the coin: things might be looking up for the firm. The share price jumping from 62p to 210p inside a couple of months didn’t just come out of nowhere. It was on the back of some lucrative deals and investments.
Great British Energy (a new government initiative) has ploughed a total of £87m into the company. The money will be used for a “new 1 GW automated manufacturing line for our next-generation stack Chronos” and will create hundreds of jobs. Should things go smoothly, then this might only be the start.
In the same month, a deal with German defence firm Rheinmetall was announced. The key detail here is the company want a reliable fuel supply when electrification might not be possible – hence ITM’s products could fit the bill perfectly.
The financials support the basic takeaway here: this is a loss-making company with a potentially very bright future. Analysts expect no profit for the next two financial years. At the same time, revenue is growing consistently and at a 74% growth rate each year.
As such, there’s still plenty of risk here. But ITM Power could be a big player in the green energy revolution. And that 69% fall might be looked at as a tasty discount in years to come. I think the stock is worth considering.
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John Fieldsend has no position in any of the shares mentioned.
