A Hydrogen Turnaround Story That Has Left the Analyst Consensus in the Dust

Morgan Stanley upgrades ITM Power to Overweight, more than doubles price target to 170p, citing lower cost of capital and earlier EBITDA breakeven. Stock rallies 16%, but most analysts remain cautious.

Morgan Stanley has thrown its weight behind ITM Power in a way the hydrogen sector hasn't seen in years. On 29 April, the US investment bank upgraded the British PEM electrolyser maker from "Equal-Weight" to "Overweight" and more than doubled its price target to 170 pence from 60 pence. It marked the first positive rating Morgan Stanley has assigned to a hydrogen equipment supplier since 2021.

The bank expects ITM Power to reach EBITDA breakeven in fiscal 2028 — a full year ahead of the market consensus. On revenue, Morgan Stanley forecasts £169 million, well above the consensus estimate of £109 million. The bull case sits at 300 pence, the bear case at 50 pence. At the heart of the revaluation is a lower cost of capital assumption, cut to 9 percent from 11 percent, justified by a declining beta and an improved risk profile.

The stock surged nearly 16 percent on the upgrade, touching 147 pence. The rally extended further, hitting a weekly high of 166.50 pence, before profit-taking pulled it back around 7.4 percent to roughly 154.80 pence. On a 12-month basis, the shares have more than quadrupled.

A Lone Bull in a Skeptical Pack

Morgan Stanley's conviction stands largely alone. The average price target across the 11 analysts covering ITM Power is just 84.60 pence — roughly 45 percent below the current share price. Seven analysts recommend buying, four say hold, and one says sell. Berenberg has a buy rating but a target of only 110 pence. UBS remains at "Neutral" with a 60 pence target, signalling that the stock has run well ahead of the fundamentals.

The price-to-sales ratio of around 38 underscores the caution. The company continues to post losses, and analysts expect negative earnings per share for the current financial year.

Insider Selling at the Peak

On the very day of the rally, a notable insider transaction came to light. Chief Technology Officer Simon Bourne exercised options on roughly 1.3 million shares — originally granted in 2018 and 2019 at a fraction of the current price — and sold nearly 873,000 of them at an average of 157.44 pence. ITM Power described the move as "sell-to-cover," a standard practice to meet the tax liability arising from option exercise. Bourne still holds around 657,000 shares after the transaction.

The explanation is plausible. The timing — at the stock's recent high after an extraordinary month — nonetheless drew attention.

The Numbers Beneath the Hype

For the first half of fiscal 2026, ITM Power reported record revenue of £18 million. Management subsequently raised the full-year guidance to between £40 million and £43 million, up from a prior range of £35 million to £40 million, citing solid project progress.

The proportion of profitable contracts in the backlog has climbed to 71 percent, up from 60 percent in April 2025. The total order book stands at £152 million. A capacity reservation agreement with RWE for 150 megawatts of Neptune V electrolysers, exercisable through 2027, adds further visibility.

Net liquidity sits at £215 million, which analysts estimate covers roughly five years of operating cash needs. Near-term pressure for a capital raise is therefore absent. The EBITDA loss for the current financial year is expected to be between £27 million and £29 million.

CEO Dennis Schulz has personal skin in the game: his share package of 1.3 million shares only vests if he meets strict conditions, including profitable contracts and on-time delivery of the Chronos project.

A Defining June Ahead

The fiscal year ended on 30 April. Final results are due by the end of October. Beyond the annual numbers, investors are watching three specific catalysts: the outcome of the UK's hydrogen allocation round 2, a potential final investment decision on Uniper's 120-megawatt project at Humber, and the planned FID for ITM Power's new Chronos manufacturing line — expected in June.

The next regular trading update is scheduled for 15 September. A June update will show whether the order book is building at the pace Morgan Stanley's thesis demands. For now, the market is betting the turnaround is real — but the analyst consensus has yet to be convinced.