Raspberry Pi is set for the FTSE 250 after 3 months on the stock market! Time to invest?

Shares of this exciting tech company could be in line for a rapid promotion to the UK’s mid-cap stock market index in September.

| 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.

Concept of two young professional men looking at a screen in a technological data centre

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.

It’s been less than 90 days since Raspberry Pi (LSE: RPI) debuted on the UK stock market. Yet it could already be set for the FTSE 250 index when the next shake-up is revealed tomorrow (3 September).

This will be based on the closing share price and market cap, so it isn’t guaranteed. But if so, the firm will join the mid-cap index later this month.

So, should I promote the stock to my buy list? Let’s take a look.

Should you invest £1,000 in Raspberry Pi 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 Raspberry Pi made the list?

See the 6 stocks

Created with Highcharts 11.4.3Raspberry Pi Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

What does Raspberry Pi do?

The company makes tiny, low-cost computers that pack in a lot of processing power for their size. They’re also incredibly versatile and can be used for a wide range of applications, including:

  • Education: Teaching programming, electronics, and computer science
  • Hobbyist projects: Building robots, home automation systems, and retro game consoles
  • Industrial applications: Controlling machines and sensors in factories and other settings

However, new use cases for these fruit-sized devices are emerging in artificial intelligence (AI), machine learning, and Internet of Things applications. These are all high-growth industries, making this a stock with enormous long-term growth potential.

A rare profitable tech IPO

The company only went public in June, so there isn’t any historic track record yet. But we do know that the firm grew its revenue 41% year on year to $266m in 2023.

Moreover, it’s already profitable, with a 14% operating margin. Diluted earnings per share (EPS) rose 70% last year.

202120222023
Total revenue $141m$188m$266m
Operating profit $18.8m$20.1m$37.5m

This is encouraging to see because loss-making companies that have gone public in recent years haven’t been well received by investors due to higher interest rates.

I don’t see any forecasts for 2024 yet. But in August we got news about the release of Raspberry Pi Pico 2, a single-board computer built on RP2350, its new high-performance microcontroller platform.

CEO Eben Upton commented: “We continue to make encouraging progress across the business and Raspberry Pi Pico 2 and RP2350 embody our core values of performance, flexibility, and affordability…We look forward to other exciting product releases through the second half of 2024 and into 2025.”

That sounds like an optimistic tone to me, though I note the firm faces a fair bit of competition worldwide. Also, like many tech companies, Raspberry Pi could face supply chain disruptions for semiconductors. That’s an ever-present risk.

A massive potential growth opportunity

The stock is currently trading on a high price-to-earnings (P/E) multiple of 32. So the market is willing to give Raspberry Pi a premium valuation for now. Whether it’ll continue to do so will depend on how quickly the company grows its sales and earnings.

Looking forward, management sees a $21bn combined market for industrial, embedded, enthusiast, and educational computing. However, research provider Fortune Business Insights has estimated that the global Internet of Things market could grow from $596bn in 2023 to $4trn (trillion!) by 2032.

Put simply, there seems plenty for the firm to go after over the next decade. And with $266m in sales and a £776m market cap (a tiddler in tech stock terms), it’s easy to envisage it growing much larger over time.

However, it’s still very early days for the stock. On 24 September, the company will release its earnings for the six months ended 30 June. I’ll read those first before deciding my next move.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

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.

Ben McPoland 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.

More on Investing Articles

Investing Articles

Up 30% in weeks, does the BAE Systems share price still offer value?

The BAE Systems share price has been on a tear over the past couple of months. This writer sees limited…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Hunting for shares to buy as the market trembles? Remember this!

After a choppy week in global stock markets, our writer goes back to basics in his hunt for bargain shares…

Read more »

Investing Articles

3 simple principles to help build wealth in an ISA

As a new tax year opens up new ISA allowances for many investors, our writer shares a trio of things…

Read more »

Investing Articles

US trade tariffs: what they could mean for UK shares like Ashtead, Compass Group, and Experian

US trade tariffs continue to rock global markets, and the UK is no exception. Our writer considers how a new…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Dividend Shares

The Trump slump has smashed these FTSE 100 shares!

After a rough week for US and UK shares, investors have been shaken. But now these FTSE 100 stocks have…

Read more »

Investing Articles

£10,000 invested in Rolls-Royce shares 5 years ago is now worth…

Rolls-Royce shares have been on fire since April 2020. Part of this is the result of pandemic restrictions lifting, but…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »