FTSE AIM renewable energy pick Ceres Power (LSE:CWR) has seen its share price rise recently. Should I buy shares for my portfolio?
FTSE AIM pick
There is a race to save the planet from getting to a point where the effects of climate change become irreversible. One of the ways to combat this is the use of clean energy. Moving away from the use of fossil fuels has become a priority for governments across the world. This has led to an increase in policy directives that will benefit firms like Ceres Power.
Ceres Power is not a big name in the energy market but it is contributing towards the renewable energy boom. Ceres produces hydrogen fuel cells to help the world transition towards clean energy. It has lucrative partnerships with companies like Bosch and Doosan.
As I write, shares in Ceres are trading for 1,111p per share. Approximately two months ago, shares were trading for 881p per share. I believe this share price increase is due to a positive trading update at the end of July. In addition, on 1 September, it announced a product launch timeline through one of its lucrative partnerships.
Performance and reasons I like Ceres right now
Ceres’ trading update at the end of July was very positive in my opinion. The update covered the six months to 30 June 2021. From a financial perspective, revenue grew by 90% compared to the same period last year. Order book and pipeline values stood at £42m and £44m respectively. Cash and short term investments stood at £263m. Ceres also raised £181m through the issue of new shares. This was supported by two of its biggest partners, Bosch and Weichai Power.
When looking for FTSE stocks to invest in for my portfolio, I always refer to the market they operate in. This is one of the reasons I like Ceres. It is in a growth market with lots of policy support. In addition to this, it has been building lucrative partnerships that will help it grow and build steady revenue streams and increase brand visibility.
Ceres is also an innovative firm. For example, it is currently in the process of making an electrolysis product. This could be a game changer in regards to clean energy and give it a competitive advantage. Finally, Ceres could benefit from the advantage of investor demographics. Millennials are a huge part of the reason there is a structural shift away from fossil fuels. These same individuals are looking to invest ethically. This could boost Ceres in my opinion.
FTSE stocks carry risks
I have concerns with Ceres Power, however. My primary issue is competition. The energy market is vast and there are lots of bigger players with the financial muscle to match. They could enter the hydrogen and electrolysis product race and blow someone like Ceres out of the water. In addition, at this moment, Ceres is losing money through its research and development. It may be years before it sees a profit.
Overall, I do like Ceres Power as a FTSE stock option. Would I invest in shares for my portfolio? In short, no. I think there is too much risk involved just now. I will keep a keen eye on developments, however.
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