The Ceres Power (LSE:CWR) share price has had a fairly torrid year, all told. From a peak of 501p in February, the shares have tanked 48% lower, at around 185p.
But there are signs such a large move is overdone, as the share price bounced 12% on no immediate news on 14 December.
That made it the FTSE 250’s biggest gainer of the day.
So what’s happening with the hydrogen fuel cell play?
Fuelling a fivefold gain?
Ceres Power shares fell hard in early December. This came as the company warned full-year revenues would dip to around £21m, down from £22m in 2022.
CEO Phil Caldwell admitted new licence partnerships for its swathe of patented technologies were taking longer to sign than first thought.
Berenberg then sliced its price target. But the City broker flagged the news a delay, rather than a more serious structural issue. It still suggests the Ceres Power share price will hit 925p. That would be a stonking 400% gain from the current price of around 185p.
Ceres Power is not yet profit-making, but has a chunky cash balance of £161m and no debt.
Fly me to the moon
The issue for me to consider is how long I may have to wait to see Ceres Power shift gears from potential energy winner to dominant force.
As an example, one key use case they cite for hydrogen is in aviation.
Hydrogen “can be used to synthesize E-fuels where higher-energy density fuel is required,” a statement on its website suggests.
Customers could include the likes of Rolls-Royce, for example. The British aerospace engine builder is working with FTSE 100 stablemate easyJet on developing hydrogen-fuelled aircraft.
But in early December, CEO Turfan Ergenbilic put a damper on how quickly this transition could take hold. “I don’t believe in the next 15, 20 years hydrogen will play a role”, he said.
The aviation industry is under huge pressure to cut its carbon output. But Ergenbilic, who has shepherded his firm to a 220% share price gain in 2023, says hydrogen fuel will take decades to come to fruition.
Buy, wait, hold
Having said all that, the use cases for Ceres’s technology are very tempting. That it has a proprietary solid oxide fuel cell and related electrolyser is particularly interesting. R&D costs are vast in energy companies.
So having a stable of patented technologies the company can licence out could be a huge money-spinner.
And I’ve produced some of my best ISA and SIPP percentage gains by sticking with small companies as they shift from burning cash to cash cow. In some cases, it has taken years.
250 to 100?
In September 2023 Ceres Power jumped into the UK’s top 250 most valuable companies. This without yet turning a profit. And while its market cap has slumped from £1.2bn in February 2023 to less than £400m six months later? Imagine what could happen if its balance sheet switches from net loss to pure profit.
Short-term delays and daily market moves tend to matter little if I am investing for decades.
But Ceres’ next trading statement is due in January 2024. I’ll wait until I hear solid progress before considering a position here.
