Is the ITM Power share price set to soar in 2024?

The ITM Power share price has been through a classic growth stock boom and bust. But, as sales rise, it’s starting to tick up again.

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The ITM Power (LSE: ITM) share price soared in 2021, on the back of enthusiasm for renewable energy stocks.

The company is all about hydrogen techology, which could play a vital part on the industry. It’s not going to happen overnight, though, and I think that’s where those investors a few years ago made a mistake.

But now the early bubble has burst, the ITM Power share price is starting to creep up again. Since first-half results were released on 31 January, we’ve seen a 30% rise.

Where’s the profit?

The interim update showed a few interesting things. But one thing it didn’t show was profit.

In fact, ITM posted a £23.6m operational loss for the period. Still, it was a much smaller loss than the £56.2m recorded for the first half of 2022.

Cash flow was similar, with a net operational cash outflow of £27.5m. Again, it’s better than in 2022, when the equivalent period saw £41.8m cash burn.

But, at least the company ended the period with cash and equivalents of £254m on the books. So it doesn’t look like there’s any danger of the lights going out any time soon.

Plan completion

We heard some stuff about ITM having completed its 12-month plan. That involved cutting costs, narrowing the product portfolio, and generally boosting efficiency. And it does seem to show through in the substantially reduced loss in the half.

CEO Dennis Schulz said: “We have achieved a shift in culture, and the transformation of the company has tangibly improved our project delivery performance. We now have a strong foundation for growth.”

Those are bold claims, but could they mark the start of a turnaround? I suspect investors are going to want to see the proof of the pudding now.

It takes time

A new technology growth stock often takes off the way ITM Power did a few years ago. And I think a company can get itself caught up in the hype too.

But a shift to extensive use of hydrogen technology is still a fairly long-term thing.

Now we’ve had a bit of a refocus, I reckon the shares could be set for a more sustainable run. Broker forecasts still show no profit on the horizon at least as far as 2026, though.

ITM appears to have enough cash to keep going for a while yet. But to reach profit, it needs to keep its sales growth going. We saw a big H1 revenue jump, to £8.9m from £2m, but we need that to be just the start.

Cost control

And the firm really needs to be able to do it without its operating costs ramping up again. Will that be possible?

I do think ITM Power’s technology and products could make a serious impact on the renewable energy business. But I’ve no idea how soon we’ll see profits, or how the next two or three years will go.

I think the uncertainty makes it too much of a gamble. But, a younger me, back when I went after growth shares, might have gone in modestly.

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.

Alan Oscroft 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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