Morgan Stanley Sees ITM Power Hitting Profitability a Year Ahead of Schedule

Morgan Stanley upgrades ITM Power to Overweight, triples price target to 170p, citing earlier-than-expected EBITDA positivity in FY2028.

ITM Power shares surged nearly 16% in London trading on Thursday after Morgan Stanley issued a dramatic upgrade, slashing its timeline for the hydrogen specialist to reach an inflection point on profitability. The stock hit 147 pence, extending its year-to-date advance to more than 100%.

The catalyst came from a sweeping reassessment by Morgan Stanley, which lifted its rating on the electrolyser manufacturer from "Equal-Weight" to "Overweight" and nearly tripled its price target to 170 pence from 60 pence. The key driver: analysts now expect ITM Power to achieve positive EBITDA in fiscal 2028 — a full year earlier than the consensus forecast.

The Numbers Behind the Upgrade

Morgan Stanley projects EBITDA of £13 million for FY28, while the broader market is still pencilling in a £4 million loss for that period. Revenue estimates have also been revised sharply higher, with the bank forecasting £169 million — roughly 54% above the consensus view of £109 million.

The improved outlook reflects both operational optimism and a methodological shift. Morgan Stanley lowered its weighted average cost of capital (WACC) assumption from 11% to 9%, signalling greater confidence in the company's financing stability.

To hit those profit targets, the analysts estimate ITM Power needs to secure roughly 200 megawatts of new orders — a threshold that looks achievable given the pipeline of potential catalysts on the horizon.

Three Scenarios, One Clear Path

Morgan Stanley laid out a range of valuation outcomes depending on how the market develops:

• Bull case: 300 pence, assuming optimal market expansion
• Base case: 170 pence, reflecting the current growth trajectory
• Bear case: 50 pence, if operational delays materialise

The base-case target implies an enterprise value of roughly £993 million, based on a sum-of-the-parts valuation.

Sector Tailwinds and Technical Caution

The stock-specific news arrived amid a broader rally in hydrogen and fuel-cell names. Bloom Energy delivered surprisingly strong quarterly results the previous day, anchored by a massive 2.8-gigawatt capacity agreement with Oracle for data centre applications. That sent Bloom shares surging more than 20%, with FuelCell Energy and Plug Power also posting solid gains.

ITM Power rode that wave, with trading volumes more than double the 30-day average in early dealings. But technical indicators flash a note of caution: the relative strength index (RSI) sits near 71, edging into overbought territory. The stock trades at a price-to-sales ratio above 35, with margins still negative — a valuation that already prices in considerable future growth.

Liquidity Provides a Buffer

On the balance sheet side, ITM Power holds net cash of £215 million, which analysts say covers the current cash-burn rate roughly five times over. That reduces the urgency for near-term capital raising and gives management breathing room to execute on its project pipeline.

What Could Drive the Next Leg

Three specific events could provide the next catalyst, according to Morgan Stanley:

• Results from the UK's Hydrogen Allocation Round 2
• A final investment decision (FID) on the Uniper Humber H2ub project, which has a 120 MW capacity
• An FID on the Chronos production line, which has 1 GW of capacity and is expected by June 2026

The path to profitability hinges on how many of these projects reach decision-ready status. By mid-summer, the picture should become much clearer — and with it, whether ITM Power can justify the market's newfound optimism.