ITM Power Forecast August 2021 – Time to Buy ITM Shares?
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Shares of ITM Power (LSE: ITM), a British manufacturer of polymer electrolyte membrane electrolysers for hydrogen production, are in the green today, currently trading around 478p. This marks one of the several instances where ITM shares are on the rise. The shares surged by 20% last week, pushing its 12-month performance to just a little under 70%. Investors are confused whether ITM shares are worth adding to their portfolio or it’s just a bubble waiting to burst.
ITM Power – Technical Analysis
According to the company’s financial statement, the current market cap is at £2.551 billion with total assets worth £72.706 million. Revenue for 2020 was at £3.29 million compared to £4.59 million in 2019.
Moving averages for ITM Power such as Exponential Moving Average (100)(420.5), Simple Moving Average (100)(415.9), Exponential Moving Average (200)(407.4) and Simple Moving Average (200)(452.0) are all pointing towards buying. Oscillators are mixed, with most of them pointing towards neutral, such as Commodity Channel Index (20)(182.4), Average Directional Index (14)(16.2) and Awesome Oscillator(40.6).
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Recent Developments
ITM Power designs and manufacturers electrolyser machines capable of extracting green hydrogen from water. An electrolyser replaces traditional methods of obtaining the element that is dependent on using hydrocarbons (fossil fuels). ITM’s technology is in high demand from customers due to governments across Europe advocating for cutting emissions. While this is positive, it has created a problem for ITM since it lacks a proper manufacturing facility. This has led to a growth of its order backlog. ITM had £154 million worth of contracts waiting to be fulfilled by the end of June 2021, with another £607 million worth of agreements due to be signed. This is a rise of 131% from 2020 and a rise of 62% from the year before. Its clientele includes wind turbine producer Orsted, Italian energy infrastructure energy company Snam and Royal Dutch Shell.
The issue of manufacturing seems to have been solved with the official opening of the company’s first Gigafactory in Sheffield. It boasts an annual manufacturing capacity of one gigawatt of electrolyser equipment, which will certainly help decrease the company’s order backlog. The latest surge has been caused by the news and on investor’s hopes that the company will now get signatures on new contracts as well.
Should You Buy ITM Shares?
Even though the above news is encouraging for investors, they still have to consider the company’s underlying financials which are not in a good shape. Although the recent share price boost has led the market cap of the company to cross £2.5 billion, it generated less than £3.5 million in revenue in addition to a record loss of £29.6 million. While investors are putting a large amount of value on the upcoming contracts, it is important for them to note that these deals are still unsigned and might remain so for the foreseeable future. Management expects the company’s revenue to reach around £35 million to £40 million by April 2022. But this would still not be enough to justify its market cap.
As the role of green hydrogen becomes crucial in a world shifting towards renewables, ITM Power is well-positioned to lead the way with its patented technology. But given the high levels of investor expectations on the shares, it shows characteristics of a bubble that could burst at the earliest signs of trouble. Investors should stay away from ITM shares as the risk is too much.
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