MIDAS SHARING TIPS: Share the rich fruits of Raspberry Pi – the technology pioneer that could be the UK’s answer to Nvidia

Raspberry PI may have started out as a supplier of classroom computing equipment, focused on teaching children to code using wires and circuit boards, but it has transformed into a technology pioneer that could be the UK’s answer to Nvidia .

Founded by Cambridge director of studies Eben Upton, who created a cheap computer the size of a credit card as part of his mission to popularize computer science, Pi has diversified into everything from cloud computing to artificial intelligence.

In June, it provided a sweet boost to the UK stock market by choosing a London IPO rather than a trip across the pond to the Nasdaq, with a 30 per cent rise in shares on the first day giving confidence that the British technology market so needed.

No wonder investors looked forward to the company’s first public half-year figures last week.

Fortunately for them, Pi provided a crispy crust and appetizing filling, but investors considering jumping in now will want to consider whether jam is also possible tomorrow.

The Pi Proposition

While Raspberry Pi is known for its hobbyist kits, the company, which describes itself as a leader in “low-cost, high-performance computing,” is targeting three separate subsets of the market.

The “Enthusiasts and Education” market is the one hoping to produce the next generation of encoders, but the company also has an “Industrial and Embedded” customer base and has now started providing semiconductors as well.

It sells 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.

There is a system of ‘global design partners’ to help integrate Raspberry Pi into third-party products that do everything from measuring seismic activity to synthesizing music. Its industrial branch now represents 70 percent of its sales.

Last week’s results showed the company is thriving, having overcome issues with its supply chain following the pandemic, with first-half profitability stronger than forecasts. Revenue rose 61 per cent to $144 million (£108 million), and the amount of profit the company makes on each SBC it sells rose 8 per cent to $8.30.

But costs also rose, particularly because of the IPO, and pretax profits barely rose, going from $10.7 million to $10.8 million.

CEO Upton says profitability in the first half of the year exceeded 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 more sales in the second half, but analysts expect a slightly weaker second half.

Risk versus reward

PI is not without risks to your success strategy. Macroeconomic conditions affect the demand for its products and this has been softer, which could affect the second half of the year and has resulted in some stocks remaining idle in warehouses.

Plus, like any other technology product, there’s a chance that someone will come up with something that does what the Raspberry Pi does faster, cheaper, or more efficiently.

But there are many positives and PI sees the opportunity for its business as huge, with an “addressable market” of $21.2 billion.

The new products include a step into Artificial Intelligence with a kit created with processor expert Hailo, in addition to the expansion of a cloud platform that has 50,000 records.

Analysts at Peel Hunt are particularly excited about the possibilities.

of ‘Edge’, where computing power is brought closer to the data source to improve speed and bandwidth. Damindu Jayaweera of the investment bank says this

will do to Raspberry Pi what

the desktop was made for Microsoft, the smartphone was made for Apple, and the data center was made for Nvidia.”

Midas Verdict:

After Cambridge semiconductor maker ARM Holdings exited its home market by listing on Nasdaq, it’s tempting to see the Raspberry Pi IPO as the start of a tech renaissance in the UK.

The shares have had an exciting start, trading last week at 395p, well above the IPO price of 280p. They are not cheap, but they are cheaper than US technology stocks. It’s worth taking a slice.

• Traded on: Main Market Ticker: RPI Contact: raspberrypi.com