For a company focussed on energy, shares in ITM Power (LSE: ITM) have indeed been moving energetically — but in the wrong direction. The ITM Power share price has tumbled 36% over the past year, at the time of writing this article earlier today.

Could this present a buying opportunity for my portfolio? I don’t think so – and here is why.

Promising business momentum

ITM’s hydrogen energy technology has attracted a lot of attention. The hunt is on globally for alternative sources of energy. Hydrogen is one of the options that may have a bright future. ITM’s years of research in the field mean that it is a leading contender in the race to commercialise and scale hydrogen energy technology. It has one factory operational in the north of England and has acquired a site for a second one in the UK. It is also planning to open a factory overseas.

As well as growing supply, ITM has been working to increase demand. It has recruited some executives with long experience in UK industry as part of its sales push. I think that should show results in the form of revenue growth in the coming couple of years. For the first six months of its year, the company reported revenue of £4.1m compared to just £0.2m in the equivalent prior year period. While the company remains loss-making, it had cash of £167m at the end of October and raised £242m of new money in November. So I think ITM has ample liquidity to sustain losses for a while.

ITM Power share price valuation concerns

Given the strong business momentum and opportunity for further sales growth in coming months, why am I bearish on the idea of adding ITM Power to my portfolio?

In a word: valuation. Currently, ITM Power has a market capitalisation of over £2bn. While revenue has been growing rapidly, it remains small. The company has been losing money for years. As it expands its production capacities, capital expenditure could push it to larger not smaller losses. Meanwhile, to boost liquidity in the face of such losses, the company has repeatedly diluted shareholders. The £242m raised in November is an example. While the cash injection is good for the company’s balance sheet, it came at the expense of diluting existing shareholders. I see a continued risk that, if the company keeps reporting losses, in future it may further dilute shareholders to raise more funds.

Next move

On top of that, although the company’s technology is promising and has attracted interest from large customers, in itself that does not mean that the future is bright. In a young industry, competition and consolidation can lead to early players losing their position. ITM Power has spent years developing its technology, but a deep-pocketed rival could develop similar products. That could stall ITM’s revenue growth, or lead it into a costly price war.

Given the risks involved and the limited scale of the commercial progress the company has made so far, I think £2bn is too high a valuation. For that reason, I won’t be buying ITM shares for my portfolio at the current price.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Lloyds Banking Group (LSE:LLOY) shares have experienced a positive 2022 to date. What factors could affect the Lloyds share price this year and should I add the shares to my portfolio? 

Lloyds share price rise

As I write, Lloyds shares are trading for 53p per share. In 2022 to date, the shares have risen from 47p to current levels. Lloyds shares have increased 47% over the past 12 months from 36p at this time last year to current levels.

Lloyds shares seem to be on an upward trajectory. I want to know what positive and negative factors could impact the Lloyds share price journey in 2022 and beyond. This will help me make a decision as to whether I would add the shares to my holdings. 

Positives factors

Rising interest rates could boost the Lloyds share price. The Bank of England (BoE) raised its base rate last month after years of close to zero interest rates. At the moment, the base rate stands at 0.25%, up from 0.1%. There are also signs the rate could increase further in the future to curb inflation. When interests rate rise, net interest margins rise. This margin is the spread between higher lending rates and lower savings rates. A higher net interest margin rate means more income through net interest, which will boost profits. 

Lloyds is the UK’s market leading mortgage provider. This means its fortunes are tied to the housing market. House prices surged massively in 2021 in the UK and show no signs of slowing down. It seems mortgage lending is back in fashion and this could benefit Lloyds’ bottom line and boost the Lloyds share price upwards.

Lloyds currently has a cash rich balance sheet. What better way to boost investor sentiment and share price than by offering investors increased dividends? Many firms cancelled dividends in 2020 and some have not resumed paying them even now. Lloyds is one such firm but dividend payments on the back of better performance could help the share price increase too.

Negative factors

Lloyds’ links to the housing market could also cause issues for the Lloyds share price and investment viability too. Rising inflation and cost could have an impact on existing mortgage loans. Could these so-called bad loans become a problem in the near future? If so, I think they could impact the share price and investment viability.

City analysts are projecting Lloyds shares to fall in 2022! They believe economic output will slow and hamper the banks, Lloyds included. When investing in shares for my portfolio I do my research and look at what educated analysts are saying too. Of course, forecasts can change based on future developments.

The pandemic is also a factor that could play a big part. New variants could rear their heads causing issues with economic growth and affecting Lloyds shares once more, as it did when the pandemic started.

Overall, I believe the Lloyds share price looks dirt cheap right now. There are factors that could boost the share price but at the same time other issues potentially around the corner that could have a negative impact. I would be willing to buy a small amount of the shares at current levels for my portfolio and keep an eye on developments.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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At the height of the pandemic, the West Texas Intermediate (WTI) oil price fell to -$37 per barrel. During this time the price of many oil stocks naturally plummeted, because a large number of oil-linked stocks essentially track the oil price. But since that time, the oil price has rebounded impressively. It now sits just shy of $80 a barrel. With this in mind, will these two FTSE 350 oil stocks prove to be good investments for me this year?

Oil stocks for my portfolio

These two oil stocks have vastly different market capitalisations. They range from £681m to £3.4bn. Tullow Oil (LSE: TLW) is the smallest of the two, but currently operates a number of explorations in Africa and South America. During the pandemic, Tullow performed relatively well in contrast with competitors in terms of its share price. In the past two years, its price fell ‘only’ 28.21%. This was noticeably less than the other oil stock I’m looking at. But revenue has been declining over the past three years and this is something that concerns me going forward. Furthermore, the company has been losing money and clearly failing to perform for shareholders. It also recently reported debt of $2.3bn. 

That all sounds like I should steer clear, but I already own this stock and I see upsides too. For a start, it has remained strong on free cash flow (FCF). And Tullow Oil recently exercised pre-emption rights on the Jubilee oil field in Ghana, that should lead to the production of 85,000 barrels of oil per day. Developments like this are key and I think that this stock has the best growth potential of the two, which is why I recently added it to my portfolio.

That strength in its FCF is consistent with the other oil business I’m looking at, Harbour Energy (LSE: HBR). Its market cap is £3.4bn, which is far greater than Tullow Oil, but Harbour Energy’s debt is higher too at $2.6bn. Admittedly, this is only marginally greater than Tullow Oil in the grand scheme of things. Harbour Energy is therefore potentially more than Tullow based on debt levels alone. Like other oil companies, however, Harbour Energy’s revenue slipped from 2019 to 2020.

But it has announced increased drilling activity in fields in the UK and Indonesia. And it has also recently announced the introduction of a dividend policy that amounts to $200m per year for an annual yield of 4.35%. I find Harbour Energy attractive because of this new dividend policy and on this front, it’s preferable to Tullow Oil, which hasn’t paid a dividend since 2019.

The oil price

The WTI oil price looks to be heading towards the high of around $85 per barrel recorded on 25 October 2021. There’s still a risk of further lockdowns denting the oil price. And this would severely impact oil firms’ stock prices. Conversely, the Organisation of Petroleum Exporting states (OPEC) may decide to vastly increase oil supply on account of the easing of pandemic restrictions. This may also negatively impact the oil price. But even though these risks can’t be ignored, I believe the oil price is set to go higher this year. So, I will be keeping my shares in Tullow Oil and buying Harbour Energy for a diverse oil portfolio to hold for the long term.

Andrew Woods owns shares in Tullow Oil. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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Greggs (LSE:GRG) is one of my best stocks to buy now. In 2022 to date, and after a trading update, the share price has dropped. Could this present an opportunity to buy shares for my portfolio cheaper than usual? Let’s take a look.

Share price drop

I think Greggs is a quality business. It is the largest bakery chain in the UK, with approximately 2,000 locations. Greggs specialises in savoury products such as bakes, sausage rolls, and sandwiches, as well as sweet treats. I must admit I am a long-term customer and admirer of Greggs products.

As I write, shares in Greggs are trading for 2,936p per share. At this time last year, the shares were trading for 1,816p, which is a 61% increase. Greggs has seen its shares soar since the market crash. The shares have actually dipped since the turn of the year, however. At the end of 2021, the shares closed at 3,337p. So what’s happened and why? Do I still rate Greggs as one of my best stocks to buy now?

Trading update and outlook ahead

Greggs released a Q4 trading update last week which made for positive reading overall. It reported that FY 21 sales surpassed 2019 pre-pandemic levels. It also said two-year sales growth for FY21 was 5.3%. An announcement of full-year results would be ahead of expectations. Q4 itself saw a like-for-like growth figure of only 0.8% compared to 2019 and down 3.3% for the full year. From an operational perspective, Greggs has opened 131 new stores and closed 28 stores.

The outlook ahead for Greggs seems positive too. It has a healthy balance sheet with close to £200m in cash and is looking to continue its expansion and growth journey through new stores in new locations.

I believe the Greggs share price has dipped due to ongoing economic pressures as well as the reported lack of like-for-like growth sales reported. The sales figures are nothing to worry about for me personally. I am also not concerned by the share price drop longer term too.

Macroeconomic figures are more of a worry and risk, however. The well documented supply chain crisis, shortage of HGV drivers affecting operations, and rising costs have put many businesses under pressure. Greggs is no different. These are factors that could affect its future progress too.

Still one of my best stocks to buy now

There are challenges ahead for Greggs in the shape of some of the factors mentioned above but I think it can navigate them successfully and continue performing well. It has a good track record of performance. Although past performance is not a guarantee of the future, I use it as a gauge when assessing investment viability. In addition to this, it has a healthy balance sheet should it be faced with stormy waters. Furthermore, it wants to continue to expand and grow which is pleasing to see.

I still think Greggs is a quality business and one of my best stocks to buy now. At current levels the shares look even more attractive to me and I would add shares to my portfolio.

Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

2021 was a turning point for the BT Group (LSE:BT-A) share price. After being decimated in 2020 and delivering negative returns for several years before that, the stock finally started heading in an upward trajectory. In fact, it climbed by just over 27% during the 12-month period, far outperforming the FTSE 100 index.

So, what was behind this positive momentum? And is it enough to double the BT share price in 2022? Let’s explore.

A year of progress

After years of poor performance, the management team is finally delivering some encouraging results. The company is undergoing quite a bit of restructuring. And by 2024, £2bn of annualised savings are expected to be achieved. It’s worth noting that the original target was 2025 but was brought forward due to faster than anticipated improvements. That’s what I like to see in a company trying to turn itself around.

On the operational front, BT is doubling down on expanding its Fibre-to-the-Premises (FTTP) network. With a target of 25 million homes by 2026, the group seems to be on track, with just under six million homes equipped as of September 2021. Meanwhile, its 5G network rollout continues to make good progress as well with an additional 1.2 million 5G customers added in its latest reported quarter. 

Needless to say, this is excellent news. And seeing the BT share price climb as a consequence is hardly surprising.

The BT share price has its risks

I must admit the prospect of the BT share price potentially surging this year is exciting. However, management has quite a few challenges to overcome that could impede progress.

From an operational standpoint, BT looks primed to thrive. However, on the financial side of the equation, there’s a lot more work to be done. Developing and maintaining telecommunications infrastructure is not a cheap endeavour. And with both revenue and profits falling over the last couple of years, the balance sheet has become riddled with debt.

The degree of financial leverage did improve in 2021, with around £3bn of obligations being eliminated. However, that still leaves a whopping £22.9bn to contend with. Consequently, almost a third of operating income is being gobbled by interest payments. And this may be about to get worse as interest rates are elevated by the Bank of England to tackle inflation.

Time to buy?

According to a report by CCS Insight, the number of UK 5G devices is expected to triple reaching as high as 800 million in 2022. That represents an enormous growth opportunity for BT to capitalise on. Given the total number of 5G customers has already reached over five million versus the 53,000 nearly two years ago in March 2020, the company may already be benefiting from this tailwind. And if it can continue to attract new customers for both 5G and FTTP, then I think the revenue stream could quickly start gaining significant momentum.

But is it enough for the BT share price to double in 2022? I don’t think so. Revenue growth aside, the poor state of the financials will likely impede the bottom line from matching this potential performance. Over the long term, this handicap may be removed. But for now, I think there are far better opportunities elsewhere.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Fintech firm Plus500 (LSE:PLUS) released its 2021 annual trading update today and the results have traders buzzing. The Plus500 share price opened strongly on Monday after ending the financial year ahead of expectations. The FTSE 250 share features a high yield and strong growth over the last two years. But is it the best option for my portfolio right now?

Results round-up

According to the latest update, the trading platform recorded revenue of $718m in the period. Almost $702m of this came directly from subscription and customer trading fees. This points to a high trading volume last year, driven by a steady increase in daily users.

The number of active customers was ahead of pre-pandemic levels throughout 2021, the firm acquiring approximately 196,150 new users. The fintech company has low operational costs that boosted earnings before interest, taxes, and amortisation (EBITA) to $387m.

The FTSE 250 share also boasts of a high dividend yield of 7.3%. Another encouraging sign for future dividends is that its revenue grew at a compound annual growth rate (CAGR) of 32% a year over the past five years. And its current yield is covered 2.8 times by earnings, which is a positive.

The share buyback programme was updated recently and stood at $12.6m on 29 October. The programme is already under way and a $10.8m buyback has already been rolled out. The board has also hinted at the possibility of a new buyback after the current programme is completed. It’s important to note that buybacks have been a feature of Plus500’s shareholder-first approach since 2017.

The company has also diversified into crypto investments and offers over 2,000 financial investment instruments. It recently included sector indices as well.

Should I buy?

The last 24 months have brought in a lot of new traders. Forced to work from home, young investors switched on to investing in record numbers in the last two years. And the explosion in the popularity of cryptocurrencies is a huge boost for Plus500. High market volatility is good for the business as customer trading activity increases. In the first few months of the pandemic between January and June 2020, revenue increased from $148m to $564m.

The new trading update means the stock is trading at a very cheap price-to-earnings (P/E) ratio of six times. And I think the higher volatility in the crypto market is a great asset for Plus500. It bolsters buying volume and the constant flip between fear and greed in the crypto space means more investors are likely to try and buy a dip or ride a high.

But the business operates in an extremely crowded space with more platforms with feature-rich packages available on the market every day. And several countries are considering regulating the crypto trade, which could cut into revenue. The company is also investing heavily in marketing and R&D and has announced a $50m, incremental R&D investment for three years. But I think investor interest could wane if future revenue is affected by huge R&D spending.

However, the firm has a very low-cost operation, a good dividend history and financial performance to back it up. I am watching this FTSE 250 share closely and would consider adding it to my portfolio in 2022.

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Investors in International Consolidated Airlines (LSE:IAG) have been understandably horrified by the share price performance over the last two years. With the pandemic decimating the travel sector, the stock collapsed by 70% in the first three months of 2020. Since then, it has limped on, even in 2021 when optimism started to hit the market.

But now that Covid-19 is slowly losing its disruptive grip on the world, can the IAG share price make a stellar comeback, potentially doubling in the process? Let’s explore what could happen in 2022.

The volatile IAG share price

To understand whether this company can return to its former glory, I feel it’s important to know why it fell from grace in the first place. In this case, the answer is pretty obvious. A global pandemic led to international travel restrictions, sending IAG’s business, and in turn, its share price down the toilet.

Unfortunately, the pandemic is still ongoing. And the fears surrounding the Omicron variant aren’t exactly helping matters. Some airlines have managed to make good progress in returning to business as usual. And IAG is no exception. However, with the company’s primary focus being transatlantic flights, recovery progress has been notably slower than the competition.

The reduced passenger capacity has led to significant cuts in operating cash flows. As such, the firm is not generating sufficient income to cover its interest payments on debt, let alone its standard running costs. Needless to say, that’s not a good sign. And it’s a problem that will likely continue to plague the business until the pandemic is over. There’s even a chance IAG could go under, sending its share price to zero.

Potential for a comeback?

As horrifying as an insolvency situation would be, there are several reasons to be optimistic about the IAG share price.

Firstly, while the pandemic may not end in 2022, the world seems to be adapting. Looking at the company’s September third-quarter earnings report, passenger capacity jumped from 21.9% to 43.4% of pre-pandemic levels. Management’s target for 2021 was 60%, and it’s something I’ll be looking for when the full-year results come out. If this goal is met and passenger volumes continue to climb in 2022, IAG’s revenue could start recovering quickly.

This is, of course, meaningless if the firm were to fail. But thanks to some oversubscribed bond issues last year, along with an additional £1bn credit facility, the company has significantly strengthened its liquidity with €10.6bn (£8.8bn) at its disposal.

Obviously, borrowing money doesn’t fix the underlying problem. However, it does give management valuable time to get operations back on track. 

The bottom line

The latest forecasts for the travel sector indicate that a full pandemic recovery for most airlines won’t happen until 2024. However, both business and consumer travel spending gaining momentum by double-digit rates. As such, I think the company should be able to restore a significant portion of its revenue stream. And it seems other analysts agree as 2022 revenue forecasts indicate total sales will land at €19bn versus the €8.5bn expected for 2021.

This 120% rise in revenue could be enough to regain investor confidence, sending the IAG share price flying in the process at similar rates. Having said that, I’m personally going to wait until the full-year results come out to get a clearer picture of the situation before making a move for my portfolio.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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