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When you see a FTSE 250 stock that’s up 988% in the past year, you could be forgiven for falling off your chair. We’re not talking about a penny stock here, but rather a company with a market-cap of £1.45bn.
Aside from the crazy rally, an important question many are asking is if this can keep going?
A crazy ride
I’m talking about Ceres Power Holdings (LSE:CWR). To begin with, let’s consider the big picture. Ceres sits in the middle of two hot themes right now, hydrogen and decarbonisation. Its fuel cell and electrolyser technology is designed to help power industrial sites and data centres with lower emissions.
We’re seeing both governments and corporations refocus on net zero goals, especially given the vulnerabilities flagged by more traditional energy sources in the Middle East. This is one key factor supporting the rally, not only in the stock but also in the sector.
Sentiment alone doesn’t deliver a 1,000% return. Another factor for Ceres has been smart execution. Over the past year, the firm’s begun converting years of research and development into tangible commercial deals.
A major milestone was the ramp-up of partnerships with players such as Doosan and Delta Electronics. With new deals announced regularly, investors are clearly excited about the revenue potential if this trend continues.
Finally, Ceres has been (and still is) a benefactor from the artificial intelligence (AI) data centre buildout. Ceres’ technology is increasingly being positioned as a clean, efficient solution for these sites. Given that many expect large-scale capex spending in this area to continue over the coming years, it looks like a major growth area for Ceres to target.
The outlook from here…
This is where things get a bit murky, from my perspective. On one hand, the long-term story does look compelling. If hydrogen scales the way many expect (and if Ceres continues to license its technology globally) the company could do very well. What I mean is that it has the potential to be a high-margin, asset-light machine. That could mean higher profits, and therefore a higher share price.
On the other hand, there are plenty of risks. Despite the soaring share price, Ceres remains loss-making, with negative earnings and a revenue base that doesn’t reflect the optimism from some investors.
In fact, the 2025 full-year results from March showed the operating loss widened from £31.1m to £47.6m.
The other big concern I have is that partnership deals are great, but the company actually needs to deliver on the promises over the coming year and beyond. That’s no easy feat. Based on the share price move, I think the best-case scenario has been factored into these deals. So if there are some hurdles, the stock could move lower fast.
Overall, I do like the company, but I think some are too optimistic about the revenue potential. Therefore, I’ll only consider buying if the stock returned to a more reasonable valuation.
This story originally appeared on Motley Fool
