The ITM share price: exciting venture or looming disaster?

Key points

  • 2022 fiscal year interim revenue was over 20 times higher than one year previously
  • The company was recently awarded a £9.4m grant by Green Hydrogen for Scotland
  • In February 2022, Credit Suisse slashed its target price from 340p to 235p  

Having fallen 56% since this time last year, the ITM Power (LSE: ITM) share price has obviously disappointed current shareholders. Nonetheless, by developing electrolysers to safely extract hydrogen from water, the company has become a big-hitter in the green energy market. Attracting the attention of many governments, the firm has recently seen rising revenue and narrowing losses. But I want to know if the business is really a shrewd investment for my portfolio. Let’s take a closer look.  

Optimism for the ITM share price

There have been a number of recent exciting updates involving the company. In January 2022, the firm sold a 24 megawatt (MW) electrolyser to Norwegian business Linde Engineering. This should begin to generate revenue in the 2023 fiscal year.

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In the same month, the German education ministry awarded ITM €1.95m in funding for the development of hydrogen power. This is part of a wider move by Germany to increase the amount of energy produced involving hydrogen. Furthermore, the Green Hydrogen for Scotland initiative awarded the company £9.4m in November 2021. It also appears Scotland is keen on exploring the possibility of hydrogen power.

In sum, the ITM share price could benefit from further moves by countries to move to greener forms of energy. The financial services firm Jefferies recently increased its ITM share price target to 800p, owing to the company’s activity in this sector. 

Recent results

In a recent trading update for the six months to 31 October 2021, the firm reported a £250m fund raise. This will finance the construction of a second UK factory in Sheffield and its first overseas operation. 

In spite of this expansion, Credit Suisse slashed its target ITM share price from 340p to just 235p. This was primarily because it thought the move to greener energy “might favour alkaline and solid oxide technologies”. Such a fall in the price target is concerning, chiefly because Credit Suisse believes the future of hydrogen energy may not be terribly bright.  

In spite of this, however, recent results appear to be going in the right direction. For the period, ITM’s revenue grew to £4.1m. This is a vast improvement from the same period in 2020, when revenue was only £200,000. Furthermore, losses started to narrow to £2.4m from £2.8m in the same period in 2020. 

There is some excitement in the ITM share price, inspired by recent deals with governments. While revenue is improving, it is still minuscule in comparison to the firm’s market capitalisation of £1.4bn. For now, I think I’ll avoid buying shares in this company. But I will leave open the possibility of purchasing at some point in the future if results continue to improve.  

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Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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