The Great ITM Power Schism: Retail Sells, Morgan Stanley Buys as a £46.5 Million Decision Looms

ITM Power shares quadruple in a year, but retail investors sell heavily as Morgan Stanley upgrades to Overweight with a 170p target, betting on early break-even by 2028.

A curious disconnect is playing out in ITM Power shares. While the hydrogen specialist has seen its stock more than quadruple over the past year, the crowd that rode the rally is now heading for the exits — just as one of Wall Street’s most influential banks issues a rare bullish call.

On AJ Bell’s trading platform, ITM Power recently became the most-sold stock, eclipsing even Shell. More than 13 million shares changed hands in a single session, pushing the price down to 143.30 pence. Technical indicators back the caution: the Relative Strength Index had flashed extreme overbought signals, and the stock was trading far above its 200-day moving average.

But into that selling wave stepped Morgan Stanley with a dramatic upgrade. The US bank more than doubled its price target from 60 to 170 pence and lifted the stock to “Overweight” — its first positive rating on any hydrogen equipment maker in five years.

A Lone Bull in a Bearish Consensus

Morgan Stanley’s optimism rests on a conviction that ITM Power can reach operating break-even by fiscal 2028, a full year earlier than the market expects. Lower assumed capital costs and an improved risk profile underpin the call.

That puts the bank sharply at odds with the rest of the Street. The average analyst price target sits at roughly 85 pence, well below current levels. UBS, for instance, keeps its target at 60 pence, signalling that the valuation has run ahead of fundamentals.

The operational picture offers some support for both sides. Management raised its full-year revenue guidance to as much as £43 million, and the order book — now worth £152 million — has a growing share of profitable contracts. In the first half, ITM Power posted a record £18 million in revenue.

Yet the pretax loss widened to over £45 million. A cash pile of roughly £215 million — or about £198 million per some estimates — covers the current burn rate around five times, easing near-term pressure for a capital raise. But with a price-to-sales ratio of about 38, the stock is pricing in a lot of future success.

The June Juncture That Changes Everything

All eyes are now on a single date in the calendar. In June, ITM Power expects a formal decision on a £46.5 million subsidy for its new Chronos production line. The broader financing package totals £86.5 million, including a £40 million equity injection from the state-backed Great British Energy vehicle.

The Chronos platform represents a step-change in the company’s technology. The next-generation electrolyser will deliver 2 megawatts per unit — triple the current Trident system — while cutting costs by 40%. The design also brings dramatic physical improvements: a 50% reduction in floor space, a 50% weight saving, and up to 90% recyclability of components.

Management plans to take a final investment decision on the Sheffield production line immediately after the June subsidy ruling. The facility is targeting 1 gigawatt of capacity by 2028, requiring investment in the hundreds of millions. A green light would also unlock 250 new UK jobs.

What Happens If the Answer Is No

The stakes could hardly be higher. A positive subsidy decision would allow ITM Power to lock in contracts for the Chronos line and accelerate its commercial rollout. A delay or rejection would throw the timeline for the new technology into serious doubt.

The company has already received £40 million from Great British Energy for a direct equity stake, and nearly £47 million in grants is earmarked specifically for the Chronos build. But the formal release of those funds depends on the June outcome.

For now, the bulls and bears are talking past each other. Morgan Stanley sees a path to profitability that others don’t. Retail traders see a stock that has run too far, too fast. The June trading update — and the subsidy decision that accompanies it — will determine which side has read the tea leaves correctly. A strong order intake for Chronos will be the essential condition for defending the elevated valuation after the recent rally.