While the hype train surrounding hydrogen stocks came to a crashing halt several years ago, ITM Power (LSE:ITM) shares have nonetheless enjoyed a pretty spectacular 2025.
The hydrogen stock is up just shy of 80% since January, transforming a £5,000 initial investment into a whopping £8,971.50.
But with industrial demand on the rise, could this be just the tip of the iceberg for investors? And if so, how much money could they make by this time next year?
ITM Power’s second wind
Back in 2021, when even unprofitable hydrogen stocks could do no wrong, ITM Power saw its share price skyrocket on excitement from over-eager investors. This valuation surge unsurprisingly reversed once investor expectations collided with reality.
Skip ahead to 2025, and this hydrogen business is once again marching upwards. But this time, it has the fundamentals backing it up.
Following its botched initial transition to commercial production, management streamlined the group’s electrolyser offerings, simplifying the order book and its supply chains. And with orders finally starting to be fulfilled, ITM’s revenue stream has been rapidly expanding.
In fact, following a recent trading update, sales are currently on track to reach as high as £40m by the end of its 2026 fiscal year (ending in April). That presents as 53% increase year on year, driven by a record order backlog that keeps growing, not because of delayed deliveries like in the past, but because of new profitable contracts from a growing list of clients.
What to watch
With ITM Power seemingly surpassing a critical inflexion point in its business, there’s a lot to be excited about moving forward. And looking at the latest analyst forecasts, it seems most institutional experts agree, with Berenberg Bank issuing a 100p price target and Jefferies upgrading its projection to as high as 115p.
That means a £5,000 investment today could grow to as much as £8,956 by this time next year. However, even with strong conviction from professionals, it’s important to recognise the risks surrounding this still-young enterprise.
Despite tremendous improvement in revenues and cash flows, ITM Power remains an unprofitable enterprise. And a big contributor is that around 40% of the group’s order book consists of legacy and largely unprofitable contracts.
As these are cleared out and the company scales its operations, margins should start to move in the right direction. And to be fair, there are already some early signs of this happening with losses for its 2026 fiscal year on track to reach £29m versus £33m a year ago.
Something else to keep an eye on is the evolving competitive landscape. Several green electrolysis companies have started to pop up both across Europe and Asia. And if rival innovation leads to cheaper or more efficient alternatives, ITM Power could find its order book drying up quickly.
The bottom line
Even at around 65p, the shares are not cheap. However, unlike in early 2021, the business today has both rapidly expanding cash flows and early signs of a path to profitability.
There’s no denying it will continue to be a volatile stock. But given the market opportunity in this burgeoning industry, even with a premium valuation, this hydrogen stock could be worth a closer look.
