Investing.com -- Shares of Ceres Power Holdings plc (LON:CWR) surged 20% on Friday following its first half results, which delivered a solid numbers update and affirmed the company's financial trajectory for the year.
Analysts at RBC Capital Markets characterized the report as strong, with financial performance aligning well with expectations and offering a reassuring outlook for investors.
The company reported revenue of £28.5 million for the first half of 2024, aligning with guidance in the range of £27-29 million.
A gross margin of 80%, at the higher end of the expected 75% to 80%, further underscored Ceres' operational efficiency.
While the cash and short-term investments showed a 10% decline to £126.1 million from the £140 million seen at the end of 2023, this reduction was anticipated.
“Solid numbers update, with signs of liquidity strengthening. It’s a solid release on the numbers front for 2024, with earnings in line with guidance and showing strong sequential improvement,” said analysts at RBC Capital Markets, highlighting a planned 15% reduction in expenditure for FY24. This is expected to strengthen Ceres’ financial position while ensuring its competitiveness in the market.
Crucially, Ceres reaffirmed its full-year revenue guidance of £50-60 million, with RBC analysts estimating the company to meet £57 million for the year.
Despite some areas of uncertainty, such as the lack of updates regarding its partnership with Weichai Power, analysts found the overall commercial activity to be robust.
RBC Capital Markets maintains an "underperform" rating on the stock, largely due to concerns about the long-term visibility of Ceres’ royalties-based business model.
While acknowledging the positive momentum in recent commercial announcements, the analysts remain cautious, citing uncertainties around key partnerships and revenue streams.
Despite this cautious outlook, the price target has been set at 160p, reflecting a blend of optimism about Ceres’ position in the fuel cell and electrolyser markets and tempered concerns over future risks.
These include the potential failure of key partners to scale up production and the competitive pressures in the emerging green energy space.