Stem, Inc.

STEM Details

Stem, Inc. (NYSE: STEM) is one of the world's largest digitally connected, intelligent energy storage networks, providing customers with an energy storage system sourced from leading global battery original equipment manufacturers (OEMs) that the company delivers through its partners as well as its Athena artificial intelligence (AI) platform, along with ongoing software-enabled services to operate it.

Latest News:

• Strategic Acquisition: On February 1, 2022, STEM acquired Also Energy Holdings, Inc. for a total purchase consideration of USD 695 million. This acquisition aims to strengthen STEM's position as a global leader in clean energy intelligence and optimization software, adding 32.85 gigawatts (GW) of solar assets under management in more than 50 countries.

Q3FY21 Results:

• Surge in Topline: The company reported a sharp uptick of 4.34x in total revenues to USD 39.83 million in Q3FY21 (ended September 30, 2021) from USD 9.17 million in Q3FY20, attributable to an increase in demand for systems and continued growth in host customers.
• Expansion of Net Income: The company's net income increased to USD 115.61 million in Q3FY21 from a loss of USD 18.79 million in Q3FY20.
• Healthy Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents (including short term investments) of USD 575.99 million and total debt of USD 89.74 million.

Risks:

• Procurement Risk: Because of the recent COVID-19 epidemic and the Delta version, the company has had trouble getting some of its components and materials from various sources both inside and outside the US. Political, social, or economic upheaval in the locations where its suppliers are located could generate future trade interruptions. Increased levies, tariffs, or other charges on imports and exports, for example, could impair the company's operations.

Outlook:

• FY21 Estimates: As of Q3FY21, STEM expects to generate revenue of USD 147 million and adjusted EBITDA of USD (25) million. The company reiterates that it expects to recognize 50-60% of total revenue for FY21 in Q4FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:

STEM's share price has fallen 54.75% in the past six months and is currently trading towards the lower-band of its 52-week range of USD 10.42 to USD 51.49. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 15.48.

Considering the significant correction in the stock price in the past six months, inorganic growth initiatives, encouraging outlook, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 12.48, down 1.19% as of February 02, 2022, 01:15 PM ET.

Three-Year Technical Price Chart (as on February 02, 2022, at 01:15 PM ET). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer

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