On Friday, Goldman Sachs adjusted its stance on Ceres Power Holdings PLC (CWR:LN), downgrading the stock from Buy to Neutral. The firm also set a new price target of GBP2.96, an increase from the previous target of GBP2.61. This rating change comes after the company's shares demonstrated significant outperformance in the market.
Ceres Power's stock has seen a considerable uptick this year, rising approximately 60% year-to-date (YTD). This increase starkly contrasts with the average decline of around 20% experienced by its European peers in the electrolyser and fuel cell sector over the same timeframe. Despite this growth, the stock has fallen by about 48% since June 21, 2022, when it was added to the Goldman Sachs Buy List. In comparison, the FTSE World Europe Index has risen by roughly 25%.
The analyst from Goldman Sachs highlighted that the positive trajectory of Ceres Power's share price has led to a valuation that stands above average when compared to its peers. Currently, Ceres is trading at 7.1 times its estimated 2025 enterprise value to sales (EV/Sales), which is a 10% premium over the 6.4 times average for its group.
The downgrade was attributed to the share price correction within the hydrogen industry, which has been influenced by a slowdown in the announcements of hydrogen project final investment decisions (FIDs). The market's reaction to these developments has been a contributing factor to the stock's performance.
Goldman Sachs' new price target reflects a cautious optimism, acknowledging Ceres Power's recent market success but also recognizing the stock's elevated valuation compared to its sector. The revised target suggests that while the firm sees potential in Ceres Power, the current share price may fully reflect the company's near-term growth prospects.
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