Are Raspberry Pi shares a once-in-a-lifetime chance to get rich?

With Raspberry Pi shares surging after a successful IPO, could this UK tech startup offer a long-term wealth creation opportunity for early investors?

| More on:

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.

Mixed-race female couple enjoying themselves on a walk

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.

Raspberry Pi (LSE:RPI) shares proved to be a sweet addition to the London Stock Exchange in last week’s initial public offering (IPO).

Fresh UK stock market listings have slumped to a 10-year low, but this tech company has attracted significant investor interest. In its first day of trading, the Raspberry Pi share price skyrocketed as much as 40%.

So, should investors consider grabbing a slice of this new stock today?

Should you invest £1,000 in Shell right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Shell made the list?

See the 6 stocks

Here’s my take.

New kid on the block

Despite the name, Raspberry Pi has nothing to do with edible treats.

The Cambridge-based business started life as the commercial arm of a charity to promote computer science education. It’s now best-known for designing and manufacturing miniature single-board computers with prices starting at just $35.

Source: Raspberry Pi

Since its inception, Raspberry Pi’s sold an impressive 60m units. Today, industrial customers account for 72% of sales. The remainder come from tech enthusiasts and educators.

Commercial applications for its computers include smart home devices, seismometers, synthesisers, cardiology device monitors, and much more.

Growth credentials

Unusually for a tech startup, Raspberry Pi’s already a profitable enterprise with zero debt. Last year, pre-tax profit rose 90% to reach $38.2m.

It’s also backed by major players, including the likes of Sony and ARM. These strategic partnerships are crucial for the fledgling company and add weight to the investment case.

Created with Highcharts 11.4.3Raspberry Pi Plc PriceZoom1M3M6MYTD1Y5Y10YALL10 Jun 202423 Jun 2024Zoom ▾10 Jun12 Jun14 Jun16 Jun18 Jun20 Jun22 Jun10 Jun10 Jun12 Jun12 Jun14 Jun14 Jun16 Jun16 Jun18 Jun18 Jun20 Jun20 Jun22 Jun22 Junwww.fool.co.uk

In addition, the group already has an attractive degree of geographic diversification. Europe’s the largest market, representing 38% of shipped units, followed by North America (29%), and Asia (26%). The rest of the world accounts for 7%.

To add a cherry on top, the potential market opportunity is huge and growing. Currently, Raspberry Pi estimates its combined target market is worth around $21bn.

All good so far, then.

Things could turn sour

However, I have some concerns about investing in the shares. Three major risks spring to mind, although it’s far from an exhaustive list.

First, the valuation. As I write, Raspberry Pi shares trade at a price-to-earnings (P/E) ratio around 29. The company has a £720m market cap.

While it’s not unusual for tech stocks to attract higher multiples, that puts the firm in the same ballpark as Alphabet, Apple, and Meta.

Whether a stock market minnow with plenty to prove deserves to trade for a similar P/E ratio as established US tech titans is a moot point. In short, it doesn’t look like a particularly cheap buy to me.

Second, there are notable competition risks. Raspberry Pi doesn’t appear to have a wide moat. Arguably, there’s little stopping other companies from eating into its market share with lower prices or better products.

Third, while the business has admirable non-profit roots, I’m concerned that its loyal community of enthusiasts may be dismayed by the decision to go public. Balancing shareholder interests with an ethically-conscious fanbase won’t be easy.

A rare chance to get rich?

Overall, I think Raspberry Pi is a fascinating company and I hope it does well. That said, I have too many doubts about the challenges it faces to invest today.

I think there are better opportunities to invest in wealth-creating stocks elsewhere, but brave investors who disagree with me might be handsomely rewarded for taking on the risks.

Should you buy Shell now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Charlie Carman has positions in Alphabet, and Meta Platforms. The Motley Fool UK has recommended Alphabet, Apple, and Meta Platforms. 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Calendar showing the date of 5th April on desk in a house
Investing Articles

Here’s how a £20k ISA could produce £1,580 of passive income in the next year

A Stocks and Shares ISA stuffed with dividend shares can be a lucrative source of passive income. Christopher Ruane explains…

Read more »

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »