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Back in June, Raspberry Pi (LSE:RPI) went public. The listing of it here in the UK was seen as a move that could help innovative tech companies look to do the same going forward, instead of listing on the tech heavy Nasdaq index in the U.S. The growth stock has now released its first major company update since the summer, with plenty of good news that could help to spark a share price rally.
Positive results
Let’s first run through some of the main takeaways from the report yesterday (24 September). Revenue surged by 61% versus H1 2023, with gross profit also rising by 47% to $34.2m.
While unit sales through direct channels declined slightly, unit sales through licensees jumped markedly, indicating that this could be a big avenue of growth for the future. In terms of the breakdown of specific sales, over half came from product sales. However, revenue from components grew from $11.1m a year back to $43.6m now. This helps to diversify the risk of being reliant from one income source.
Cash flow and general liquidity doesn’t appear to be a problem. After raising $31.8m after fees in the IPO, the firm finished the half year with $40.4m of net cash. This should allow it to invest and pursue opportunities that could further help to add to revenue down the line.
One point of note that the report flagged up was that these figures are made “against a supply-constrained comparative H1 2023”. Therefore, the gains might be less impressive if compared to a more normal period from last year.
Comparing to Nvidia
The share price jumped 6.6% yesterday and is up another 6.5% so far today. This indicates to me that investors see a bright outlook for the company.
I’ve seen some comparisons to Nvidiaand that it could be the UK’s poster child for this sector. I think it’s important to make the distinction clear between the two companies. Although both operate in the computing sector, Nvidia focuses on the top end, with high-performance hardware. Raspberry Pi is focused on more affordable computing systems for everyday use.
Despite this, I do think that we can draw similarities to the growth in Nvidia in recent years and the potential for Raspberry Pi. Nvidia shares have jumped by 2,714% over the past five years. Although I don’t expect the same for Raspberry Pi going forward, I think that it can definitely outperform the broader index.
This is because there’s a wide market for the computing products that the business makes. As adoption of the products continues, along with further development, I believe it will get more recognition in the industry. It’s still at the stage where large growth (as we’ve seen in the results) is possible due to the size of the company.
Being patient
One risk is that I might be setting my benchmark too high. Whenever a stock is referred to in the same category as Nvidia, people want to see exponential returns. Therefore, I need to be patient and understand that Raspberry Pi shares might take time before any rally starts.
Although the two companies are not the same, I think the growth prospects for Raspberry Pi are high and so am looking at investing.
The post Is this chip growth stock the UK’s version of Nvidia? appeared first on The Motley Fool UK.
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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Nvidia. 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.
Motley Fool UK 2024