It has been a rough ride for hydrogen stocks lately, but one investment bank thinks there are still reasons to look closely at the UK names.
In a new sector update, RBC Capital Markets reiterated its preference for ITM Power PLC (AIM:ITM), keeping an 'outperform' rating and a 70p price target, suggesting plenty of upside from the current level.
ITM’s recent commercial momentum is encouraging. It raised revenue and cash guidance for 2025 and looks increasingly confident about its pipeline.
There is still some overhang from old, less profitable contracts, but RBC points out that these are being cleared out and newer deals should offer better margins.
At today’s market cap, the market is effectively valuing ITM's cash pile but assigning little to no worth to the business itself. RBC believes that is far too pessimistic, especially given a more disciplined management team now in place.
Meanwhile, Ceres Power Holdings PLC (LSE:CWR, OTC:CPWHF) is still seen as a mixed story.
RBC has a 'sector perform' rating here and trimmed its price target to 90p from 110p.
The problem for Ceres lies in partner risk: after Bosch scaled back its involvement, questions hang over how fast Ceres can grow its royalty streams.
The solid oxide technology also lags behind better-established systems like PEM (proton exchange membrane) electrolysers when it comes to green hydrogen scale-up.
Across the sector, RBC expects consolidation to continue, particularly as funding conditions tighten.
But the UK remains in focus for green hydrogen development, helped by government-backed initiatives like the HySpeed project and HAR2 funding rounds. That should benefit domestic players like ITM.
In short, if investors are willing to look beyond the near-term volatility, there could still be real opportunities in the sector, and ITM Power looks better placed than most to make the most of them.