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This thrilling mid-cap development inventory caught my eye after going gangbusters in October. Inexperienced power specialist Ceres Energy (LSE: CWR) was the very best performing FTSE 250 inventory in October, leaping virtually 75%.
In fact, that doesn’t imply it should hold climbing in November. Revenue takers have already began to emerge, and Ceres has proven it may be unstable. It’s up 360% in six months, however solely 33% over the yr, and down 62% over 5 years. It appears to be like like this one may very well be a rollercoaster trip.
Ceres has the ability
Ceres develops stable oxide gas cell and electrolyser expertise for clear energy era and inexperienced hydrogen manufacturing. They’re designed for AI information centres, industrial buildings, electrical energy grid stabilisation and cleaner marine energy. The corporate operates a expertise licensing mannequin, which retains it asset-light and strengthens its monetary place.
In July, Ceres received a lift when strategic accomplice Doosan Gas Cell started mass manufacturing of gas cell stacks in South Korea utilizing its expertise. These stacks will energy clear power programs in high-growth markets like AI information centres. Doosan anticipates the primary sale by yr finish. If it comes via, this would be the first royalty revenues Ceres will get. It’s a giant alternative for buyers looking for a riskier FTSE 250 development play.
Big AI potential
Ceres has a market cap of £520m however isn’t but worthwhile. Final yr it misplaced £28.3m. Income for 2024 climbed 132% to £51.9m, supported by document orders of £112.8m from new partnerships in Asia.
But on 26 September this yr, the shares fell after it reduce full-year 2025 gross sales steering by practically 40% on account of delays in a brand new manufacturing licence settlement. The board pinned that on sturdy comparatives following a major one-off licence with accomplice Delta in 2024. It didn’t cease buyers from chasing the chares greater final month.
Then on Wednesday (29 October), Swiss Financial institution UBS practically tripled its share value goal from 120p to 350p and upgraded Ceres to Purchase, citing accelerating demand for its stable oxide gas cell expertise and a greater monetary outlook.
Lengthy-term potential
UBS expects the corporate to interrupt even in 2026, a yr sooner than beforehand forecast, because of value cuts and that royalty earnings from Doosan. The financial institution sees Ceres capturing as much as 10% of a rising AI information centre phase probably price £50bn by 2030. Low capital depth and money burn may go away the corporate with a £50m money buffer in 2026 earlier than turning cash-flow constructive in 2027, it reckons.
The Ceres share value jumped 16% on Wednesday (29 October) to 306p however ended the week at 277p, together with a 7.64% drop on Friday. Revenue takers, presumably.
Six out of seven analysts ranking Ceres up to now three months labelled it a Sturdy Purchase, one mentioned Maintain. Their consensus one-year value forecast is 275.8p, simply 3% above at this time’s stage. In fact, most estimates could have been made earlier than the current surge.
Given the big dangers, I feel it’s solely price contemplating for skilled buyers with a portfolio that may deal with swings. I’m watching the shares fastidiously and should think about shopping for in the event that they slide a bit from right here. I’d really feel safer shopping for after a dip than a spike.
