On Tuesday, JPMorgan (NYSE:JPM) adjusted its stance on ITM Power PLC (LSE:ITM) (OTC:ITMPF), downgrading the stock from Overweight to Neutral and reducing the price target to £0.90 from the previous £1.30.
The firm anticipates that the company's financial year 2025 (FY25) revenue guidance might prompt a downward adjustment in market expectations, potentially leading to a negative reaction in the stock's performance.
The downgrade follows a period of significant developments for ITM Power, including a successful 12-month turnaround program completed in January 2024 under CEO Dennis Schulz.
Since then, ITM Power has secured several orders and large capacity reservations, which JPMorgan acknowledges as indicators of the company's robust long-term market position. Despite these positive developments, the firm predicts that revenue from ITM Power's larger orders will likely be deferred to FY26 and beyond.
JPMorgan's revenue projections for ITM Power are substantially lower than the current Bloomberg consensus, with a forecast of approximately £24 million for FY25, which is 50% below the consensus estimate of around £48 million. For FY26, the firm's expectations are also 26% lower than the consensus.
These revised forecasts have led to the reduced price target and the decision to place ITM Power on Negative Catalyst Watch ahead of the FY24 results announcement scheduled for August 15.
While JPMorgan has lowered its short-term expectations for ITM Power, it still sees potential for the company's value to increase in the longer term. The firm suggests that there might be a more favorable opportunity to invest in ITM Power once market expectations align more closely with JPMorgan's estimates. In comparison to its industry peer, Nel ASA, which also holds a Neutral rating, JPMorgan continues to show a preference for ITM Power in the long run.
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