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 - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.