For a moment around the start of last month, there was optimism in the air for shareholders of ITM Power (LSE: ITM). The share price surged almost 40% in a week. But since then, the shares have fallen back to stand within 2% of where they began the year. That means that they are still 70% down over the past 12 months.

What is going on – and does it present a buying opportunity to add this renewable energy share to my portfolio?

The surge at the end of January and beginning of February arose because the new chief executive unveiled his plan for moving the company forward. It involves a more focussed product portfolio, tighter cost management, and the use of rigorous engineering benchmarking.

Investors hoped that might mean a change from ITM’s previous story. It was one of great technology but limited commercial success – and massive losses. Revenues for the first half of the company’s current financial year more than halved, to £2m. But the total comprehensive loss for the period was a whopping £56.8m. Yes, those numbers are the right way around, although they may not look it!

Once the dust settled, though, I think investor enthusiasm started to cool again, driving down the ITM Power share price.

After all, a plan is just a plan. So far there is no evidence of whether it will be the medicine ITM Power needs. With a market capitalisation of over £600m, the company still looks pricy to me until it concretely proves it has a viable business model.

Will that happen?

I do not think we will know for years, although there may at least be some indications this year. Even that is unclear, though. The company now expects full-year revenue of around £2m. But it already generated that much in its first half. So it seems as if the remaining six months may be a housekeeping period during which no substantial new sales are booked. At the end of the financial year, we may still be in the sort of ‘jam tomorrow’ situation that is all too familiar to ITM shareholders.

Bringing focus to the company and sorting out its cost base seem like smart, obvious moves to me. On their own, though, these steps will not generate growth. Indeed, paring the product lineup could do the reverse. I remain unclear about the speed and scale of rollout for the future ITM Power sales model.

The new plan involves pricing contracts at a level where servicing them should not involve making losses. Again, that is a smart and obvious move. But ITM has a small sales footprint already and it may now walk away from more deals than before.

The company has good technology. Reducing cash burn is clearly a priority and focussing on its strengths could help build a much better, more profitable customer base. Those things may all help the company. But in the short term, the results of the new plan might not be very obvious. I think that could drive the ITM Power share price down further from here. I have no plans to buy.

The post Why has the ITM Power share price been falling again? appeared first on The Motley Fool UK.

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C 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.