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I got quite a shock when I saw ITM Power (LSE: ITM) shares in an unexpected place this week. For context, I was browsing through the ‘Top Buys and Sells’ page of AJ Bell. Each week, the broker reveals what Brits have been buying and selling in their Stocks and Shares ISAs.
What was top of the sell list? Not heavyweights like Rolls-Royce, Shell or AstraZeneca, not even a FTSE 100 company at all, but FTSE AIM-listed ITM Power with a market cap of just over £1bn. The Sheffield-based green energy company made up for nearly one in every 50 sell trades made on the platform! Let’s answer the questions you are probably wondering: What’s going on here? And why is everyone selling the stock?
Hot property
The first thing to point out: this is a very hot property. The ITM Power share price has had a monster of a year, rising from around 30p last May to over 150p today. There aren’t many stocks anywhere that have risen five times over the last year, so it’s natural that the company is getting a lot of attention.
Following on from that is that there is likely some profit-taking being done. In other words, investors who held the stock are looking to realise the gains, perhaps fearing that some of the surge in share price could be reversed due to volatility.
While we at The Motley Fool prefer to hold stocks over the long term – ideally, that means 10 years or longer – it’s fairly common for investors to see their portfolios climb and want to consolidate some of the profits.
Of course, the real question for those of us who haven’t invested is whether it’s a good buy today. Can the ITM share price continue its rapid ascent? There are two key questions here, as far as I see it.
Two question marks
First question – is this technology going to be viable and useful? The hydrolysers ITM Power manufactures can take energy from renewable sources and convert them to hydrogen to be used later. This kind of energy storage has potential. And the recent deals booked with Great British Energy and the German company Rheinmetall are two big votes of confidence that hydrolysers may have a big role to play in the green energy revolution.
Second question – can the company make money? ITM Power is still loss-making and will be for a while yet. While revenue is soaring (it’s expected to triple by 2027), the sticking point here will be whether the firm turns a profit on its products. It’s worth pointing out here that this is not a new company – it’s been around since the year 2000.
Overall? I can see why ITM Power shares are getting a lot of attention these days. There are still question marks hanging over the stock, but for investors aware of the risk profile, I think it could be worth considering.
