Could Raspberry Pi shares hit £5 by 2030?

After a strong start out of the blocks this month, our writer asks whether Raspberry Pi shares could move further upwards in coming years.

| More on:
Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer

Image source: Getty Images

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.

So far, Raspberry Pi (LSE: RPI) has certainly been a sweet-tasting investment. On the day the budget computer maker listed in London earlier this month, priced at £2.80, shares soared at one point as much as 40% above the listing price. Raspberry Pi shares are still trading around a third higher than the listing price.

Did the underwriters of the listing price them too cheaply? I think so: such a jump suggests a higher price could have worked.

But that is now water under the bridge. As an investor, the question I am asking myself is whether I ought to add Raspberry Pi shares to my portfolio in the hope of future price growth.

Setting a long-term target

As a believer in the long-term approach to investing, I tend to ask myself how well I think a share might perform over the course of years.

If Raspberry Pi shares can go up another 33%, as they have done since listing, they will hit £5. If the share price can go up by less than 6% each year, it would have topped £5 by 2030.

That might not sound exciting. After all, the company does not yet pay a dividend and 6% annual growth is little more than the current interest rate set by the Bank of England. Putting my money in a bank would carry almost no risk of capital loss, unlike buying shares of any company.

Then again, Raspberry Pi is a rare British technology success story on the London market right now. Its simple computers have been enormously popular with budget shoppers, while the straightforward nature of their design means that there is a host of possible uses that could help spur growth.

Remember when Apple launched the iPad, people asked why anyone would want what seemed like an oversized smartphone. Nobody asks that nowadays, with iPads used in swathes of situations from hotel check-ins to warehouse management.

I think Raspberry Pi has a huge untapped market. Last year sales rose 41%, following a 34% jump the year before that.

Upbeat about the business – what about the shares?

A strong brand, unique market positioning, and proprietary technology could keep the Raspberry Pi ecosystem growing at pace. That may be good for the company. Reported profits last year were $31.6m and I think they could grow in future.

But that puts Raspberry Pi shares on a current price-to-earnings ratio of 29. That looks pricy to me. A price of £5 would imply a prospective P/E ratio of around 39.

Again, that looks pricy to me even on a timescale of over five years.

We have seen the business growing quickly. If earnings per share can grow fast enough, the prospective P/E ratio would fall and a £5 price by 2030 could certainly be possible, if not sooner.

However, I see a risk that another company may try to ape the business model and focus on even lower manufacturing costs. Raspberry Pi had a head start, but do did Sinclair and Amstrad in the 1980s.

There is a lot to like here, but the valuation is a bit rich for my tastes at the moment. So I will not be investing.

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.

C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. 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

Investing Articles

Could this beaten-down UK growth stock be the next Rolls-Royce?

Mark Hartley feels Rolls shares have had their time and are running out of steam. Now he’s searching for the…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Down 10% in a month! What’s gone wrong with the BAE Systems share price?

Harvey Jones suspected all was going a bit too well for the BAE Systems share price. Things went wrong immediately…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Are BT shares still a bargain after climbing 30%?

BT shares are finally showing signs of life after years in the doldrums. Harvey Jones thinks this may point to…

Read more »

Investing Articles

£10k in an ISA? Here’s how I’d aim to generate a ton of passive income

I dream of escaping the shackles of a salary with financial independence and a steady stream of passive income. Here’s…

Read more »

Investing Articles

Are Burberry shares a bargain or a value trap?

Appearances can be misleading in the stock market. Shares that look like a bargain can turn out to be a…

Read more »

Investing Articles

How I’d target £17,673 passive income with just £100 a week

Our Foolish writer explains how he’d build a portfolio capable of generating a life-changing passive income with limited capital.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

If I’d put £20k into a FTSE All-Share tracker fund 10 years ago, here’s what I’d have now

A lot of UK investors have money in FTSE All-Share tracker funds. Here, Edward Sheldon looks at how these products…

Read more »

Investing Articles

How I’d invest £10k in a SIPP to target £28,000 annual passive income

Investing just £10k today in a SIPP could be the key to a chunky retirement income in the long run.…

Read more »