Investing in penny stocks can be risky. With many of them pre-revenue and most lacking the financial firepower of larger companies, shareholders can suffer some painful losses.
However, it doesn’t always have to be like this. Indeed, here’s one stock that’s seen a 500% increase in its share price over the past year. It was one of the FTSE’s minnows. Now (3 April), it’s a much bigger fish. Let’s take a closer look at the reasons behind its growth and consider its future prospects.
Then and now
On 4 April 2025, with nearly 194m shares in issue at a price of 47.9p, Ceres Power (LSE:CWR) just about qualified as a penny share. Since then, its market cap has soared from close to £100m to approximately £650m. Why?
Increased demand for the group’s solid oxide fuel cell (SOFC) and electrolysis cell technologies is the principal reason.
This comes off the back of huge worldwide investment in data centres. It’s widely acknowledged that Europe’s energy infrastructure is struggling to keep up with the extra capacity needed for AI-related activities. But the group’s fuel cells use hydrogen to quickly (and cleanly) generate electricity and heat via a chemical reaction.
The group adopts a licensing approach by selling the intellectual property rights to manufacture its cells to third parties. Its partners include Shell in India and, last week (26 March), it announced a deal with Centrica, one of the UK’s largest renewable energy suppliers.
A potentially enormous market
In October 2025, the group’s share price received a boost when UBS brought forward its prediction of when the company will break even by one year, to 2026. The investment bank expects the SOFC market to be worth £50bn by 2030, with Ceres Power securing around 10% of this.
However, UBS is talking about breaking even at EBITDA (earnings before interest, tax, depreciation, and amortisation) level. With a post-tax loss of £47.5m in 2025, it’s likely to take at least another year before Ceres Power’s bottom line’s in the black.
However, it hasn’t all been good news. In 2025, Bosch ceased working with the group claiming that hydrogen-to-electricity conversion is not being prioritised enough in Europe. And the company reported a “slowdown in the demand for hydrogen solutions”.
This led to a 37% reduction in revenue for the year compared to 2024. And a £16.3m widening of its operating loss.
On the up
Nonetheless, it looks to me as though the company’s back on track. When its partners reach commercial scale, the group receives a royalty payment based on every kilowatt of product sold. Significantly, it earned its first royalties in 2025.
Although Ceres Power might not be a penny stock any more, it’s still loss-making. However, its capital light business model, in which others take on the manufacturing risk, means it retained a net cash position at the end of 2025. And it helped the group generate an impressive 70% gross profit margin.
The group’s clearly convinced a number of blue-chip companies that its fuel cell technology is one way to overcome current grid capacity constraints. And despite its stellar rally, analysts reckon the shares are still approximately 50% undervalued.
On this basis, despite the obvious risks surrounding a company that’s seeking to develop relatively new technological solutions, I think the stock’s one to consider.
