I’m ‘blowing a raspberry’ at Raspberry Pi shares. Here’s why

Some early investors have made great profits from Raspberry Pi shares. But our writer’s questioning whether the ‘easy money’ has already been made.

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Having sprinted out of the blocks earlier in the month, Raspberry Pi (LSE: RPI) shares have been grabbing the headlines. That’s understandable. How nice it is that a tech company — it designs and develops single board computers — has chosen to shun the US market, list in the UK, and actually do well for those who had the courage to buy early.

Having said this, I won’t be joining this party.

No blue-sky bet

For the avoidance of doubt, I’m not a complete bear when it comes to the company. There are actually quite a few things I like.

First, Raspberry Pi is a business that makes real money today rather than jam tomorrow. It’s already sold over 60 million computers in the last decade. From the data that’s available to me, it looks like it earns decent margins too.

Interestingly, the company’s also backed by chip designer and rare UK tech success story ARM. That’s pretty reassuring.

On a speculative note, the company’s mid-cap status could mean that shares rise more strongly than your typical FTSE juggernaut in the event of a cut to interest rates as well (just as the market tends to shun smaller companies when rates go the other way).

Why list now?

Notwithstanding this, I don’t like to get involved in newly-listed shares. One reason is that there’s usually a lot of hype. Justified or not, it’s often the case that some of those early to the show bank some profit (assuming things go well).

That seems to be the case here. At one point, Raspberry Pi shares changed hands for 500p each. At yesterday’s (20 June) close, they traded for 380p!

Something else worth bearing in mind is that we rarely see new stock listings during difficult times. In other words, the company’s major shareholder — Raspberry Pi Foundation — believed it was getting a fair, possibly great price by letting it go public and allowing other investors to grab a slice of… er… pie.

Is this just a classic case of selling high and cashing in? I’m not so sure. The Foundation is a charity whose aim is to get more young people involved in computing.

Even so, I’m still questioning whether the firm can truly deliver on the growth story within its prospectus. Just how easy would it be for a rival to set up shop elsewhere in the world and impact demand for its products?

Food for thought.

No income

There’s also one thing that I wouldn’t get if I were to invest. A dividend stream. To be fair, new-stocks-on-the-block tend not to throw cash back at their investors. They’re more interested in using the money they have to expand.

The problem is that I won’t be paid for my patience if the stock trades sideways for a while (or worse).

Steering clear. For now…

In sum, I’ll be watching from the sidelines for now. This is the case, even if Raspberry Pi shares go on to recapture their momentum and then some. I actually hope it does, if only for the sake of a UK market that’s struggling to attract new listings.

But if this company’s destined for my portfolio, I first need to see that it’s capable of meeting (and beating) analysts’ expectations.

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.

Paul Summers 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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