Is the ITM Power share price bouncing back?

Over the past year, have shares in ITM power (LSE: ITM) is no longer rewarding. During that time, ITM Power’s share price fell 77%. But the stock has risen over 20% in the past week or so.

Today, the hydrogen electrolysis manufacturer announced that it is expanding several business premises as part of its turnaround plan.

Is this good for the company’s prospects – and should I buy now?

Switch strategically

Earlier this year, the company announced a new short-term strategy. It aims to reduce its activities and focus on some of the most promising business lines. Part of this plan includes taking a robust approach to product validation and preparing for manufacturing at scale.

Last month, the company announced that it had tripled the electricity supply to its main site. Today, he announced that he will “substantially” expand the site. This will allow ITM to create a dedicated research and development center, including facilities for product validation and testing. This should also free up some production space for higher production volumes.

The move shows that ITM is serious about implementing its strategy. I see a positive for the long-term prospects of the business. Its technology is strong. Until now, the challenge as a business is to expand production, sales, and services with a profitable commercial model.

Stock price impact

As ITM Power’s share price rises, at least some investors seem enthusiastic about the company’s prospects.

However, long-term share price performance remains disappointing. Even after the recent bounce, the stock is about 30% lower than the price it hit in early February as investors digested the new strategy.

So while ITM’s more commercially focused approach makes sense to me, I think the City remains skeptical about how the business will do.

This ‘show the money’ way of thinking suggests that if ITM Power’s share price rises again, the company will need to demonstrate that its strategy is being used to address its key challenges to date. The main one is profit: last year’s loss was around £57 million even though the company only made a profit of £2 million.

Wait and see

So, although I see promise in ITM technology and appreciate the current strategy, I’m not in a rush to buy shares for my portfolio.

Investing will involve the same questions I have with other renewable energy stocks. The market is evolving and it remains difficult to determine who will be the winner in the long run. The commercial history of ITM is worrying because it has lost money hand over fist for years.

A leaner approach can help the company play to its strengths, but I still have a lot of work to do to increase sales, improve manufacturing capabilities, and develop a profitable business model.