ITM Power (LSE: ITM) shares have had a choppy two years and are down to only 69p. That’s a 90% drop from their high of 682p in 2021.
Despite a cheap price, this Sheffield-based company could be a key to the world adopting greener, safer energy.
Its ‘green hydrogen’ technology has the potential to solve renewable energy’s biggest problem.
Does this make the stock’s discounted 69p price a must-buy?
What is green hydrogen?
First off: what does ITM power actually do?
In the company’s words: it designs and manufactures “electrolyser systems that generate hydrogen gas based on Proton Exchange Membrane (PEM) technology”.
In simple terms, these devices turn renewable electricity into a gas – called green hydrogen – that is easy and cheap to store.
Why is this so big?
It has incredible potential to revolutionise renewable energy. Right now, it costs a lot to store solar or wind power.
This is why so many countries still rely on fossil fuels, as they can fire up coal or gas power plants whether or not the sun is shining or the wind is blowing.
And the use of green hydrogen isn’t just a theory. It’s already happening:
- The UK wants to increase hydrogen production to 10 GW by 2030 with half of that coming from green hydrogen
- Green hydrogen was recently made eligible for $3 per kg in tax credits in the US
- The World Economic Forum is aiming for an 80% increase in hydrogen electrolysers by 2027
- The renewable energy market predicted to reach over $2trn by 2030
- Hydrogen-fuel cars could be a major catalyst further down the line
If green hydrogen takes off, then ITM Power could be a stock I’d want to hold for 10 years or more.
Previous highs
It’s worth pointing out that this isn’t the start of the hype here. Since being founded in 2000, the ITM Power share price reached highs of 336p in 2006 and then 682p in 2021.
The shares are looking cheap today at only 69p. So now might be a great time for me to buy while the stock is at a low ebb. The crucial detail is how the company is shaping up for the future.
What’s happening now?
Last year, ITM Power was forecast to produce 38 MW (megawatts) out of 287 MW total worldwide production.
That would make it the second-largest producer of hydrogen electrolysers in the world.
Demand is increasing too. The firm’s order backlog rose to 755 MW in September 2022 from 421 MW in September 2021.
This includes two 100 MW green hydrogen electrolysers for Linde – the £63bn market cap German gas behemoth – which will be the largest in the world.
A shorted stock
It’s not all good news though. The firm’s latest earnings revealed revenue of only £2m for H1 2023, down from £4.2m a year earlier. And the adjusted EBITDA loss widened to £54m from a loss of £12.9m.
Those revenue figures seem tiny compared to a £427m market cap. And they explain the 90% reduced share price too.
It also might be why ITM Power is one of the most shorted stocks on the London Stock Exchange. Over 4 of its shares are short positions.
These issues mean I just can’t see this one as a buy for me, even if I do admire the potential.
