The Ceres Power (LSE:CWR) share price has had a fairly torrid year, all told. From a peak of 501p in February, the shares have tanked 48% lower, at around 185p.
But there are signs such a large move is overdone, as the share price bounced 12% on no immediate news on 14 December.
That made it the FTSE 250’s biggest gainer of the day.
So what’s happening with the hydrogen fuel cell play?
Fuelling a fivefold gain?
Ceres Power shares fell hard in early December. This came as the company warned full-year revenues would dip to around £21m, down from £22m in 2022.
CEO Phil Caldwell admitted new licence partnerships for its swathe of patented technologies were taking longer to sign than first thought.
Berenberg then sliced its price target. But the City broker flagged the news a delay, rather than a more serious structural issue. It still suggests the Ceres Power share price will hit 925p. That would be a stonking 400% gain from the current price of around 185p.
Ceres Power is not yet profit-making, but has a chunky cash balance of £161m and no debt.
Fly me to the moon
The issue for me to consider is how long I may have to wait to see Ceres Power shift gears from potential energy winner to dominant force.
As an example, one key use case they cite for hydrogen is in aviation.
Hydrogen “can be used to synthesize E-fuels where higher-energy density fuel is required,” a statement on its website suggests.
Customers could include the likes of Rolls-Royce, for example. The British aerospace engine builder is working with FTSE 100 stablemate easyJet on developing hydrogen-fuelled aircraft.
But in early December, CEO Turfan Ergenbilic put a damper on how quickly this transition could take hold. “I don’t believe in the next 15, 20 years hydrogen will play a role”, he said.
The aviation industry is under huge pressure to cut its carbon output. But Ergenbilic, who has shepherded his firm to a 220% share price gain in 2023, says hydrogen fuel will take decades to come to fruition.
Buy, wait, hold
Having said all that, the use cases for Ceres’s technology are very tempting. That it has a proprietary solid oxide fuel cell and related electrolyser is particularly interesting. R&D costs are vast in energy companies.
So having a stable of patented technologies the company can licence out could be a huge money-spinner.
And I’ve produced some of my best ISA and SIPP percentage gains by sticking with small companies as they shift from burning cash to cash cow. In some cases, it has taken years.
250 to 100?
In September 2023 Ceres Power jumped into the UK’s top 250 most valuable companies. This without yet turning a profit. And while its market cap has slumped from £1.2bn in February 2023 to less than £400m six months later? Imagine what could happen if its balance sheet switches from net loss to pure profit.
Short-term delays and daily market moves tend to matter little if I am investing for decades.
But Ceres’ next trading statement is due in January 2024. I’ll wait until I hear solid progress before considering a position here.
The post The Ceres Power share price spikes after 50% crash. Signs of life in hydrogen yet? appeared first on The Motley Fool UK.
Should you buy Ceres now?
Don’t make any big decisions yet.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.
And he believes they could bring spectacular returns over the next decade.
Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows…
When such enormous changes hit a big industry, informed investors can potentially get rich.
So, with his new report, Mark’s aiming to put more investors in this enviable position.
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
This FTSE 100 giant is in value stock territory! I’m buying more shares!
2 FTSE dividend shares paying cash of up to 11.6% a year
2 UK shares I’d buy in a 2024 stock market crash
1 FTSE 100 share I’m thrilled I bought this year, and one I wish I hadn’t
Is this unloved FTSE 250 ‘bargain’ share about to double in price?
Tom Rodgers has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
