The Motley Fool

Renewable energy stocks: should I now buy ITM Power shares?

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.

Environmental technology concept
Image source: Getty Images

ITM Power (LSE: ITM), the Sheffield-based hydrogen energy solution company, has had a wild stock market ride over the past year. The shares are currently changing hands at £5.00 but previously peaked in January 2021 at £7.24. Despite the decline in the company’s shares over a one-year period, investors would have seen an increase in value of their holdings of 66.15%. When looking at performance over multiple years, the share price performance has been truly eye-watering. 656% over two years, 1,539% over three years and a remarkable 2,003% if investors had held the shares over a five-year period.

ITM Power is globally recognised as an expert in hydrogen technologies. Its overarching principle is to take excess energy from the power grid and convert it into green hydrogen, utilising its own electrolysers, which are designed and built at its Sheffield base. The hydrogen is used in three main areas: mobility, chemicals, and industrial application. With governments around the world clamouring for clean energy solutions to help avert a climate catastrophe, interest in green hydrogen has really taken off.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

ITM recently announced it was part of a consortium that had been awarded a grant from the European Climate, Infrastructure and Environment Executive Agency for the development of a 100MW electrolyser at Royal Dutch Shell’s energy and chemicals park in Germany. The grant totalled £27.5m. This is a world-leading project that demonstrates the increasing commitment by governments and industry to decarbonise at scale, using zero carbon footprint green technology.

In a show of confidence, the investment banking group Jefferies recently initiated coverage of ITM with a ‘buy’ rating and a target price of £8.00. Jefferies stated its preferred play on green hydrogen is the electrolyser companies and within that sub-sector ITM is its top pick. It sees a potential 60% share price upside from current levels.

ITM continues to expand rapidly. It recently agreed terms to acquire a site for its second UK factory in Sheffield. The £13.4m, fully automated factory of around 260,000 square feet is expected to have a capacity of 1.5GW per annum. This will complement its existing 1GW site. 

Despite all the positives, ITM Power isn’t without its issues. Hydrogen technology is still very much in its infancy and huge amounts of money are required to drive the research and development. Despite governmental interest in green hydrogen, there is no guarantee of commercial success. In the firm’s latest results, ITM reported that losses for the full year had widened to £21.4m. The loss-making company has a market capitalisation of £2.73bn due to the surging share price. The surge, in this investor’s opinion, is based on optimism and not financial results.

In the case of ITM Power, I believe that if I continue to hold my shares I will be rewarded over the longer term. It is important to note, however, that when investing for the long term I am always wary of putting all my eggs into one basket. I therefore spread my funds and invest in different sectors and geographies. I remain resolute in my belief that diversification is key to building a successful portfolio over the longer term.

Our 5 Top Shares for the New “Green Industrial Revolution"

It was released in November 2020, and make no mistake:

It’s happening.

The UK Government’s 10-point plan for a new “Green Industrial Revolution.”

PriceWaterhouse Coopers believes this trend will cost £400billion…

…That’s just here in Britain over the next 10 years.

Worldwide, the Green Industrial Revolution could be worth TRILLIONS.

It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead!

Access this special "Green Industrial Revolution" presentation now

Isaac Stell owns shares in ITM Power. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.