Seeing a big price move on the FTSE 250 index isn’t that unusual. Compared to the FTSE 100, it can be more volatile, since its smaller market-caps are easier to move.
But a three-fold increase in just a few months? That’s pretty rare! And yet, that’s exactly what happened to Ceres Power Holdings (LSE: CWR), the £720m fuel cell technology company that recently joined the index.
The share price is up over 200% in the past three months, rising from around 100p in mid-September to over 300p today! So what’s driving this insane growth and does it present an investment opportunity? I had to find out.
A power-hungry partnership
Ceres’ recent fortunes have been primarily driven by a significant manufacturing license deal with Weichai Power, a major Chinese power systems developer. This agreement allows Weichai to produce Ceres’ proprietary solid oxide fuel cell (SOFC) technology for stationary power systems, targeting fast-growing markets such as AI data centres, commercial buildings and industrial applications.
The deal not only strengthens and expands an existing partnership but adds a major global manufacturing partner to Ceres’ portfolio.
On top of that, it positions the company to capitalise on a multi-billion-dollar opportunity in clean energy solutions. But the true value of the deal will only be realised in 2026 — a potential reason why investors are scrambling to get a foot in the door early.
Naturally, all this hype comes with some risks that can’t be ignored. The Weichai deal certainly looks good on paper, but Ceres still faces some real challenges.
For starters, its near-term revenue visibility’s unclear, with FY2025 revenues expected to be flat (or declining). This is due to one-off license fees and delays in revenue recognition. The company also operates in a competitive, rapidly evolving clean energy space where technology adoption rates and regulatory policies can impact growth.
So while the new deal promises growth, investors should avoid pricing in unrealised revenue. The company’s valuation is already sky high as a result of this, which could lead to volatility if growth expectations aren’t met.
The bottom line
A 200%+ price gain’s hard to ignore — growth like that doesn’t just materialise from hype alone. But while there’s certainly an exciting development here, it may be a ‘buy the rumour, sell the news’ situation.
Investors should be cautious about the potential of a sharp correction if things don’t pan out as planned. On top of that, there’s broader market risks affecting clean tech stocks, including economic downturns and shifts in government incentives.
Overall, the Weichai deal has been a transformative growth catalyst for Ceres Power but the price now looks overvalued. For investors looking for long-term exposure to what may be a groundbreaking green energy company, it’s worth considering. However, I’d tread carefully and allocate it as a small portion of a larger, diversified portfolio.
Right now, green energy’s facing considerable challenges but I think its long-term prospects remain promising. For those interested, there are other opportunities on the UK market worth looking into.
