Raspberry Pi (LSE:RPI) shares are down 23% since the beginning of the year. In other words, £10,000 invested then would be worth just £7,700 today. That’s clearly not a good return, and perhaps a reflection of the fact that the stock was getting a little bit pricey.
What’s new?
On 2 April, Raspberry Pi reported its first full-year financial results since its IPO on the London Stock Exchange in June 2024. The company posted a 2% decline in revenue to $259.5m and a sharp 57% drop in pre-tax profit to $16.3m, attributed to higher R&D and administrative costs, alongside inventory challenges.
Despite these setbacks, Raspberry Pi launched an impressive 22 new products in 2024, including artificial intelligence (AI) hardware developed with Hailo and Sony, and next-generation modules, marking a 267% increase in product releases compared to the prior year.
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The market reacted positive due to a promising outlook for 2025. Raspberry Pi anticipates normalised inventory levels and steady demand growth throughout the year, supported by embedded design wins and secured memory supply. Gross profit per unit is expected to improve, bolstered by accessory sales like AI cameras and HATs (Hardware Attached on Top) with AI accelerators. This confidence was reflected in the market, as the shares rose by 7% on the morning of the results.
The jury is out
Raspberry Pi’s valuation is certainly on the expensive side, reflecting high investor expectations for its growth potential. As of 2 April, the company trades at a forward price-to-earnings (P/E) ratio of 54.6 times for 2025. That drops to 40.6 times in 2026. While this suggests earnings growth, it remains steep compared to industry averages and peers. These are typically hovering around the mid-30s range. The PEG ratio (price-to-earnings-to-growth) provides further insight into this valuation. For 2025, its PEG ratio is projected at one, indicating fair value relative to its expected earnings growth rate.
The market capitalisation currently stands at approximately £990m, up significantly from its IPO valuation of £542m last year. Analysts remain cautious, with a consensus rating of Hold and an average price target of £5.42, a modest potential gain from today’s trading price of £5.04.
While the strong product pipeline and demand recovery are promising, its lofty valuation metrics signal that investors are paying a premium for future growth. Whether this premium is justified depends on the company’s ability to sustain its trajectory amid competitive pressures and macroeconomic uncertainties.
Personally, I find the company very interesting. However, the high valuation and relatively low barriers to entry in this minicomputer market are off-putting. For now, I’m going to watch from the sidelines. Nonetheless, it’s important to recognise that the forecast earnings growth is pretty unique for a UK-listed company. That alone could generate additional investor interest and fuel momentum, a rare commodity in UK markets.
