ITM Power’s Rally Takes a Breather as Twin Catalysts Loom

After a blistering run that saw shares nearly triple this year, ITM Power hit a wall on Friday as profit-taking snapped the upward momentum. The stock closed at 143.30 pence, down 7.4 per cent, having touched a year-high of 179.69 pence just days earlier. The sell-off made it the most traded stock on AJ Bell’s platform that day, with 13.2 million shares changing hands.

The pullback was overdue. The shares had become technically stretched, with the Relative Strength Index reaching 91 and the price far above its 200-day moving average of 78.42 pence. Weekly volatility of 9 per cent outstripped most of the UK market.

But the retreat comes at a crucial juncture. Two events later this month promise to provide the next directional impulse. On 26 May, the UK Department for Energy Security and Net Zero will rule on a £46.5 million grant for the Chronos automated production line in Sheffield. Two days later, after the market close on 29 May, ITM Power will join the MSCI United Kingdom Small Cap Index — a move that should trigger passive buying from tracker funds.

Beneath the price action, the underlying business continues to improve. Revenue for the first half of the financial year reached a record £18 million, and management now expects full-year sales of £40-43 million, up from a prior forecast of £35-40 million. The order book stands at £152 million, with more than 70 per cent of contracts deemed profitable — a sign that the company is balancing volume growth with margin discipline.

Should investors sell immediately? Or is it worth buying ITM Power?

Losses remain significant, however. The pre-tax loss for the year to April 2025 widened to £45.4 million from £27.1 million a year earlier, though the adjusted EBITDA loss in the first half narrowed to £11.9 million from £16.8 million, suggesting cost controls are taking effect.

ITM Power’s balance sheet offers a buffer. Net cash is expected to end the current year at £210-215 million, up from earlier guidance of £170-175 million, leaving ample runway. With roughly £198 million in cash and no debt, a capital raise before the end of the decade is not considered necessary. A total of £86.5 million has been lined up for the factory expansion — £40 million in equity from Great British Energy and the £46.5 million grant — with the aim of boosting electrolyser capacity to one gigawatt per year.

Analysts are divided on valuation. Jefferies raised its price target to 200 pence from 115 pence, citing improved earnings expectations and lower discount rates, but warned that a negative grant decision could knock 52 per cent off the stock. Morgan Stanley sees fair value at 170 pence and believes an operating break-even is achievable by the 2028 financial year. The company’s market capitalisation stands at around £1.11 billion.

ITM Power at a turning point? This analysis reveals what investors need to know now.

The industrialisation push also includes a 100-megawatt PEM electrolyser supply for RWE’s Lingen project. The Chronos platform is central to the strategy, aiming to boost power density and cut stack manufacturing costs. In recent trading, the shares have been seen around 156.70 pence, with support near 150 pence and resistance at 166.50 pence.

With the grant ruling and index inclusion days apart, ITM Power faces a week that could either validate its lofty valuation or expose the fragility of a rally that has already defied gravity.

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ITM Power Stock: New Analysis - 17 May

Fresh ITM Power information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

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