Stem Inc Uses Artificial Intelligence to Manage Renewable Energy
2022 was disastrous for technology stocks and other growth stocks. For instance, the Nasdaq recorded its worst year since 2008. This situation presents aggressive contrarian opportunities to risk traders.
A green energy stock that’s down by about 80% from its high and is worth a look is Stem Inc (NYSE:STEM)
The company uses artificial intelligence to help its clients maximize their renewable energy generation and build an efficient and cleaner power grid. Its customers include utilities, independent power producers, companies with their own power systems, project developers, and installers.
The recent nasty sell-off of Stem stock presents an aggressive opportunity since the global move to green energy will continue to pick up.
High Revenue Growth
Stem Inc’s revenues expanded from $17.6 million in 2019 to $127.4 million in 2021, representing a compound annual growth rate (CAGR) of 169.0%. In the 12 months to September, the company reported $260.3 million in revenues.
Stem’s forward revenue growth looks impressive. Analysts estimate that the company’s revenues increased by 211.2% to $396.4 million in 2022, and that they will increase by 61.6% to $640.8 million in 2023. (Source: “Stem, Inc. (STEM),” Yahoo! Finance, last accessed January 6, 2022.)
| Fiscal Year | Revenues (Millions) | Growth |
| 2019 | $17.6 | N/A |
| 2020 | $36.3 | 106.3% |
| 2021 | $127.4 | 251.0% |
(Source: Ibid.)
Stem Inc is years away from producing profits and positive earnings before interest, taxes, depreciation, and amortization (EBITDA).
On the bottom line, Stem recorded an adjusted loss of $0.93 per diluted share in 2021. Analysts estimate that this loss narrowed to $0.75 per diluted share in 2022 and that it will further narrow to $0.50 per diluted share in 2023.
On the plus side, Stem Inc has the time and resources to execute its business plan. That’s because the company’s balance sheet has a solid amount of working capital, sufficient cash of $293.5 million, and debt of just $542.6 million. The company’s interest expense of $17.4 million in 2021 isn’t a problem.
Significant Risk/Reward With Stem Stock
Stem Inc shows high potential on its stock chart.
Given that Stem stock is down by 83% from its record high of $51.49, which was set in February 2021, it could be close to a bottom. The stock reached a low of $5.72 in May 2022.
The downside risk is somewhat limited at this point. I view the upside potential as more than compensating for the risk.
Stem stock recently moved into a golden cross pattern, with its 50-day moving average of $11.89 above its 200-day moving average of $11.05. Those levels represent the immediate targets.
Chart courtesy of StockCharts.com
Stem Inc has relatively strong institutional ownership, with 315 institutions holding a 59.5% stake in the company. (Source: Yahoo! Finance, op. cit.)
Analyst Take
Stem Inc’s fabulous revenue picture and expected financial growth are bullish characteristics.
The company needs to control its cost side and move toward profitability and positive EBITDA. One key factor in Stem’s favor is the bullish tailwinds in the renewable energy segment.
Stem stock’s horizontal Fibonacci retracement levels point to targets of $23.40, $29.53, and $34.01.