Ceres Power share price rebounds, but will it continue?
While the Ceres Power (LSE: CWR) The stock price has seen a steady decline this year, we have seen a slight rebound since mid-July with a 10% increase last week.
But is there another storm ahead for the UK-based fuel cell developer? Here I am examining if Ceres Power will continue to bounce back.
Strong commercial potential
Renewable energy sources continue to be a hot topic for the future of the energy industry, and Ceres is certainly an already established player in the field as the company has seen tremendous growth over the past 20 years. last years.
The company’s revenue reached £ 21.9million in 2020, up 15% from the previous year.
Ceres is also extending its technology to many different areas. One of these areas is the use of hydrogen to power buses and trucks. Chinese company Weichai is currently considering launching a Weichai bus test. The company’s business report could be a huge business victory for Ceres and great news for investors as Weichai has a stake in Ceres worth £ 54.3million.
I think as the business value of hydrogen related technologies becomes increasingly realized over the next decade, Ceres could realize big profits if it continues to offer a successful and marketable model for its technology. This is what investors hope to be the case, but I doubt it.
Ceres has additional commercial investors in Bosch and Doosan. In 2020, Ceres reached a £ 43million deal with Doosan to build a manufacturing facility in South Korea and develop high-power products to meet large-scale electrical applications.
I think the potential marketable opportunities around Ceres Power demonstrate that the company could get rid of the cobwebs of falling stock prices. However, I am unwilling to add Ceres to my portfolio until it can prove that this growth will be achieved and sustained.
What is holding back the course of the action?
While the company does important business for its growth, I remain concerned with the investment model presented by Ceres.
I have doubts about Ceres because it is a young and growing company, due to the uncertainty surrounding future demand for fuel cell technology, and because it is difficult to say which companies will end up being the winners in this industry. These factors have left me uncertain about the trajectory of this share price and reluctant to invest.
It is also important to mention how drastic the drop in prices has been since the start of the year. The price, before last week’s rebound, had fallen 30% since January. One of the main reasons why I don’t think an investment would pay off well for me is the volatility of the Ceres Power share price.
In addition, if Ceres has succeeded in improving its balance sheet through fundraising, this has come at the expense of diluting existing shareholders. I am concerned that if I were to buy shares of Ceres Power it could happen again as the company seeks to grow.
Will the Ceres Power share price continue to rebound?
I think it really depends on the ability of Ceres to continue to provide a marketable and commercial solution for its technology in the future. The agreements with Bosch, Doosan and Weichai are all good indicators that the former could be achieved.
However, until this potential has a more solid basis to be realized, I wouldn’t be surprised to see the Ceres Power share price fall again and that’s why I won’t be investing anytime soon.
John Town has no position in the stocks mentioned. The Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.