MIDAS SHARE TIPS: Share the rich fruits of Raspberry Pi – the technology pioneer that could be Britain’s answer to Nvidia
Raspberry PI may have started out as a supplier of classroom computer kits, aimed at teaching children about coding using wires and circuit boards, but it has grown into a technology pioneer that could be the UK’s answer to Nvidia.
Founded by Cambridge studies director Eben Upton, who created a cheap credit card-sized computer as part of his mission to popularize computer science, Pi has expanded to include everything from cloud computing to AI.
In June it gave a nice boost to the British stock market by choosing an IPO in London over a trip across the pond to Nasdaq, with a 30 percent rise on the first day giving the British technology market much-needed confidence.
Kits: Raspberry Pi was founded by Cambridge studies director Eben Upton, who created a cheap credit card-sized computer as part of his mission to popularize computer science
No wonder that investors were eagerly awaiting the company’s first public half-year results last week.
Luckily for them, Pi provided a crispy crust and a tasty filling – but investors considering whether to jump in now will want to ask themselves whether jam is a possibility tomorrow.
The Pi proposal
Although Raspberry Pi is known for its hobby kits, the company, which describes itself as a leader in “low-cost, high-performance computing,” focuses on three distinct subgroups of the market.
The ‘Enthusiast & Education’ market hopes to produce the next generation of coders, but the company also has an ‘Industrial & Embedded’ customer base and has now started supplying semiconductors as well.
It sells the single board computers (SBCs) but also ‘compute modules’, which are designed for the industrial market and can be used to automate conveyor belts and control robotic arms.
A system of “global design partners” exists to help integrate Raspberry Pi into third-party products that do everything from measuring seismic activity to synthesizing music. The industrial branch now accounts for 70 percent of turnover.
Last week’s results showed the company is thriving after shaking off post-pandemic supply chain issues, with profitability in the first half stronger than expected. Turnover rose 61 percent to $144 million (£108 million), and the profit the company makes on each SBC it sells rose 8 percent to $8.30.
But costs also rose, mainly as a result of the IPO, and pre-tax profits barely rose, from $10.7 million to $10.8 million.
CEO Upton says profitability in the first half of the year was above expectations, but expectations for the full year remain unchanged. The company is launching a new microcontroller board, the Pico 2, which it says should mean it will sell more in the second half of the year, but analysts expect a slightly weaker second half of the year.
Risk versus reward
PI is not without risks to its strategy for success. Macroeconomic conditions are affecting demand for its products and they have been softer, which could impact the second half and result in some inventory sitting unused in warehouses.
Furthermore, like any other tech product, there is the possibility that someone will come up with something that does what the Raspberry Pi does faster, cheaper or more efficiently.
But there are many bright spots and PI thinks the opportunity for his company is huge, with an ‘addressable market’ of $21.2 billion.
New products include a move into artificial intelligence with a kit created in collaboration with processor expert Hailo, plus expanding a cloud platform with 50,000 logins.
Analysts at Peel Hunt are particularly excited about the possibilities
of ‘Edge’ – bringing computing power close to the data source to improve speed and bandwidth. Damindu Jayaweera, from the investment bank, says this
will ‘do with Raspberry Pi what
the desktop did it for Microsoft, the smartphone did it for Apple and the data center did it for Nvidia’.
Midas judgment:
After Cambridge semiconductor manufacturer ARM Holdings exited its home market by listing on the Nasdaq, it is tempting to see Raspberry Pi’s IPO as the start of a British tech renaissance.
The shares have had an exciting start, trading at 395p last week, well above the share price of 280p. They are not cheap, but cheaper than US technology stocks. Worth taking a slice.
- Traded on: Main Market Ticker: RPI Contact: raspberrypi.com
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