Is the ITM Power share price now primed for recovery?

Invest in hydrogen energy companies ITM power (LSE: ITM) has delivered explosive results – but not as much as investors expected. However, the stock has been in a good way erupt portfolio value. In the last month, the share price of ITM Power has changed by +74%.

The stock fell in morning trade today after the company issued another profit warning. But with the stock now trading well below previous levels, could this be a buying opportunity for my portfolio? After all, I think that renewable energy is a growth area, but so far there has been no light for my holdings.

Bad news or good news?

Today’s statement contains bad news. The company said it expects lower revenue and higher loss before interest, taxes, depreciation and amortization than expected. Worrying, because the company has been continuously losing money for years. It lost £47m in its most recent financial year.

However, I do see a potential silver lining to the announcement. Last month, the company appointed a new chief executive. A detailed operational review is also underway, with more comprehensive guidance and a short-term strategic plan, to be announced later this month.

This may mean that management is now seriously working on issues that ITM Power has been dealing with for a long time, such as commercializing the technology in a profitable way. If it looks as positive as it seems, the investment case may be more attractive now than ever.

While ITM Power’s share price has fallen, the company may be entering a period of strategic recovery that helps improve its financial prospects.

In addition, it should be noted that the company had net cash of £318m at the end of October. That’s close to 60% of its current market capitalization of £554m.

Ongoing risk

If the short-term review can make the circle significantly increase profits while cutting costs – which ITM Power has historically struggled with – then I think the stock could now be poised for a recovery.

However, I’m not going to dip into my pocket and buy it anytime soon. ITM Power’s prospects are still full of questions for which there are few clear answers.

Can sales increase? After all, today’s statement talks about focusing on “core product package“. That may actually mean fewer sales than previously expected.

Can ITM Power cut its losses? Although the claim is called “rigid approach“For cost, the company is also preparing to manufacture at scale. That can be expensive.

Can companies accelerate commercialization? ITM Power is now called “strong product validation“. It seems like a smart move (and indeed one that I hope has become part of the company’s approach). But it could mean the timeline is extended.

Too risky for me

In other words, even after the current statement, ITM Power’s investment case includes many unanswered questions. It may become clearer with strategic announcements scheduled for this month.

Even then, before considering investing, I will wait for hard evidence of the financial success of the company, not just a good strategy. Meanwhile, stocks look too racy for personal risk tolerance.