Are Raspberry Pi shares a brilliant bargain below £3?
What’s been going on with Raspberry Pi (LSE: RPI) shares? Shares of one of Britain’s youngest and most exciting tech companies have been bouncing up and down like a yo-yo.
Only listed via its IPO in June 2024, the stock more than doubled in value (up 130% to be precise) in just a couple of months. The share price has been falling since. And investors can now pick up a share for 60% cheaper than at its all-time high. The price has just fallen below the £3 mark for the first time.
Before getting into whether a brilliant bargain is on offer here, it’s worth pointing out that Raspberry Pi isn’t exactly a household name. So let’s start with a little detail on this intriguing technology firm.
Hobbyist computers
Raspberry Pi produces and sells what might be called ‘DIY computers’. These devices are both small (at about the size of a credit card) and cheap (with some models costing as little as £7). They can be used for hobbyist electrical projects or even as a lightweight personal computer.
While Raspberry Pi first made its name for home use, a majority of its customers are now businesses. That’s because its products offer a wide range of computing solutions. These tiny computers are so versatile that they can be applied to many use cases.
These tiny computers can be made into custom security systems, for instance. All that’s needed is a little knowhow and a camera to hook it up to.
Raspberry Pi has a market cap of £589m which puts it into London’s smaller index, the FTSE 250. This is a business that’s still growing too, with forecasts for 2026 expecting earnings and sales to continue rising.
What happened?
The future success of this company may hinge on artificial intelligence. Raspberry Pi is considered something of a pick-and-shovel play. This is one reason why the shares shot up in value earlier in the year.
The subsequent fall was partly caused by a rough half-year report in which earnings fell. Other issues like increased memory costs (because of the demand from AI) and a downgrade in analyst ratings didn’t help either.
As a growth stock, there’s a lot of future growth in earnings baked into the price. The price-to-earnings ratio of 80 is one of the highest on the FTSE 250. That suggests we could be looking at an expensive buy with this one.
On the other hand, high P/E growth stocks in the tech sector have made some of the best investments this century. For an investor who’s aware of the risks of stocks with such eye-watering valuations, I’d say this is one to consider. It might even turn out to be a bargain.
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John Fieldsend has no position in any of the shares mentioned. The Motley Fool UK has recommended Raspberry Pi Plc. 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.
