This FTSE stocks share price is up 25% in 2 months. Should I buy shares?

Jabran Khan delves deeper into a renewable energy FTSE stock that has experienced a significant share price rise in the past two months.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

FTSE AIM renewable energy pick Ceres Power (LSE:CWR) has seen its share price rise recently. Should I buy shares for my portfolio?

FTSE AIM pick

There is a race to save the planet from getting to a point where the effects of climate change become irreversible. One of the ways to combat this is the use of clean energy. Moving away from the use of fossil fuels has become a priority for governments across the world. This has led to an increase in policy directives that will benefit firms like Ceres Power.

Ceres Power is not a big name in the energy market but it is contributing towards the renewable energy boom. Ceres produces hydrogen fuel cells to help the world transition towards clean energy. It has lucrative partnerships with companies like Bosch and Doosan.

As I write, shares in Ceres are trading for 1,111p per share. Approximately two months ago, shares were trading for 881p per share. I believe this share price increase is due to a positive trading update at the end of July. In addition, on 1 September, it announced a product launch timeline through one of its lucrative partnerships.

Performance and reasons I like Ceres right now

Ceres’ trading update at the end of July was very positive in my opinion. The update covered the six months to 30 June 2021. From a financial perspective, revenue grew by 90% compared to the same period last year. Order book and pipeline values stood at £42m and £44m respectively. Cash and short term investments stood at £263m. Ceres also raised £181m through the issue of new shares. This was supported by two of its biggest partners, Bosch and Weichai Power.

When looking for FTSE stocks to invest in for my portfolio, I always refer to the market they operate in. This is one of the reasons I like Ceres. It is in a growth market with lots of policy support. In addition to this, it has been building lucrative partnerships that will help it grow and build steady revenue streams and increase brand visibility.

Ceres is also an innovative firm. For example, it is currently in the process of making an electrolysis product. This could be a game changer in regards to clean energy and give it a competitive advantage. Finally, Ceres could benefit from the advantage of investor demographics. Millennials are a huge part of the reason there is a structural shift away from fossil fuels. These same individuals are looking to invest ethically. This could boost Ceres in my opinion.

FTSE stocks carry risks

I have concerns with Ceres Power, however. My primary issue is competition. The energy market is vast and there are lots of bigger players with the financial muscle to match. They could enter the hydrogen and electrolysis product race and blow someone like Ceres out of the water. In addition, at this moment, Ceres is losing money through its research and development. It may be years before it sees a profit.

Overall, I do like Ceres Power as a FTSE stock option. Would I invest in shares for my portfolio? In short, no. I think there is too much risk involved just now. I will keep a keen eye on developments, however.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jabran Khan 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.

More on Investing Articles

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Could the FTSE 100 be set to soar in 2024?

The FTSE 100 keeps threatening to go off on a growth spree. And weak sentiment keeps holding it back. But…

Read more »

Investing Articles

Is this FTSE 100 stalwart the perfect buy for my Stocks and Shares ISA?

As Shell considers leaving London for a New York listing. Stephen Wright wonders whether there’s an undervalued opportunity for his…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

3 things I’d do now to start buying shares

Christopher Ruane explains three steps he'd take to start buying shares for the very first time, if he'd never invested…

Read more »

Investing Articles

Investing £300 a month in FTSE shares could bag me £1,046 monthly passive income

Sumayya Mansoor explains how she’s looking to create an additional income stream through dividend-paying FTSE stocks to build wealth.

Read more »

Investing Articles

£10K to invest? Here’s how I’d turn that into £4,404 annual passive income

This Fool explains how using a £10K lump sum can turn into a passive income stream worth thousands for her…

Read more »

Investing Articles

1 magnificent FTSE 100 stock investors should consider buying

This Fool explains why this FTSE 100 stock is one for investors to seriously consider with its amazing brand power…

Read more »

Rainbow foil balloon of the number two on pink background
Investing For Beginners

2 under-the-radar FTSE 100 stocks under £2

Jon Smith identifies two FTSE 100 stocks that he believes are getting a lack of attention from some investors but…

Read more »

Investing Articles

£8,000 in savings? I’d use it as a start to aim for £30k a year in passive income

Here's how regular investing in the UK stock market, over the long term, could help us build up some nice…

Read more »