May 10 2024 - Stem low $1.16 closed 1.20 Stem
Cash per share 69¢
Has lost more than 95% of its relative valuation compared to its peak. Star Peak Energy Transition, shares hit prices topping $50 per share in 2021.
May 10 2024 - Stem low $1.16 closed 1.20 Stem which has lost more than 95% of its relative valuation compared to its peak. Very low valuation stocks tend to explode once positive catalysts like announcements or analyst ratings materialize. Average analyst price target is $4.05.
Share Information Shares Outstanding (millions) 157.77 Market Capitalization (millions) 211.42
Price Ratios
Price/Book 0.57 Book Value 3/31/24 2.36 12/31/23 2.74 9/30/23 2.91
Price / Sales 0.50
Current Ratio
3/31/24 1.71
12/31/23 1.88
9/30/23 1.90
Investment Thesis
Stem, Inc. (NYSE:STEM) is a company that specializes in AI-driven clean energy solutions and services. Its stock has slumped since reaching its highs of the low 50s. It has lost about 90.46% over the last three years, underperforming the S&P 500 by a margin of about 126.61%.
Following with massive loss, it appears that this stock has bottomed, and it is currently in what appears to me as a consolidation phase where a trend reversal is likely, or a downward breakout could occur. Even though the company’s fundamentals are weak at the moment, A downward breakout is improbable because the company is currently making new business strides forward, which should usher in a bullish trajectory in the long run.
Its total debt stands at $603.88 million, translating to a debt-to-equity ratio of 1.42. This is a very high leverage and it is a cause of concern. Additionally, Stem has a low price-sales ratio of 0.87 which is 42.30% less than the sector median. This implies that the company is significantly undervalued. It holds a forward revenue growth rate of 34.07% for this company which is way above the sector median of 6.24%. Further, the company enjoys a backlog of about $2 billion which provides more visibility in its earnings possibilities in the future. It has managed to reduce its operating leverage from 52% in 2021 to $24 in 2023, and they are targeting to bring it down to about 10-20% in 2024. Stem's (NYSE:STEM) sales growth has been remarkable, with the company recording an 83% two-year compound annual growth rate from its fiscal 2023 third quarter on the back of ramping demand for renewables. Solar and wind energy are now on track to account for 16% of total US electricity generation in 2023, growing to 18% in 2024 with dual production tax and investment tax credits provided by the 2022 Inflation Reduction Act set to bolster the growth of US solar by an additional 160 gigawatts over the next decade. At risk here is the company's solvency against cash and equivalents at $125.4 million at the end of the recent third quarter. This was down $12.8 million sequentially and down around $168 million versus a year ago. However, the bulk of this debt is near-zero interest rate convertible debt including 2028 unsecured convertible notes that bears interest at a rate of 0.5% per year. Hence, Stem only faced a $4.4 million third-quarter 2023 interest expense.
CEO John Eugene Carrington sold 194,171 shares of the firm’s stock in a transaction dated Thursday, May 2nd. The stock was sold at an average price of $1.85, for a total value of $359,216.35. Following the sale, the chief executive officer now directly owns 506,585 shares in the company, valued at approximately $937,182.25.
Results on Thursday, May 2nd. The company reported ($0.46) earnings per share for the quarter, missing analysts’ consensus estimates of ($0.21) by ($0.25). Stem had a negative return on equity of 34.37% and a negative net margin of 40.03%. The company had revenue of $25.50 million for the quarter, compared to analyst estimates of $66.67 million. During the same period last year, the company earned ($0.29) earnings per share. The business’s revenue for the quarter was down 61.9% compared to the same quarter last year. As a group, equities research analysts anticipate that Stem, Inc. will post -0.51 earnings per share for the current year.
Quick Ratio
3/31/24 NA
12/31/23 1.78
9/30/23 1.65 Stem reported record low revenue of $25 million with an expectations miss of about 60% (in part due to hardware price guarantees made in the past with a negative impact of $33 million), almost unbelievably low bookings of $24 million, and about $300 million QoQ drop in contracted backlog.
Stem is still negatively affected by contractual obligations made in late 2022 and early 2023, where its management decided to grant hardware price guarantees "in order to gain a foothold in the public power and large front-of-the-meter markets". Stem announced its new asset performance management suite, PowerTrack APM, to foster recurring software revenues. The product builds on Stem's solar asset monitoring software.
Lucky I sold and never bought back until March 10, 2024.
Sep 10, 2021
09:34:55 am
Your order to BUY STEM was FILLED.
Filled @ $33.01
Execution Time: 3:18 p.m. ET
Order Number: F21VNHFH
Stem, Inc. (NYSE:STEM) Q1 2024 Earnings Call Transcript May 2, 2024
Now let’s turn to Slide 4 on our first quarter 2024 results and highlights. We continue to execute on our three guiding principles in the first quarter. We delivered record non-GAAP gross margin and near breakeven performance on operating cash flow. We also accelerated our pace of annual recurring revenue activations. And finally, we launched another software-only product offering. We are on a solid foundation to continue delivering against our financial targets for the full year 2024.
In the first quarter, we recorded $25 million in revenue, down 62% versus first quarter 2023. Revenue this quarter was negatively impacted by a $33 million adjustment as a result of some legacy contract guarantees from 2022 and the first half of 2023, which were further impacted by accelerating market conditions, including extended project timelines and declining battery prices. It’s important to note this change had no impact on our cash flows in the quarter and as a result of a legacy contract structure, which as previously committed, we have not offered such guarantees to customers since the first half of 2023. We achieved our record non-GAAP gross margin of 24% this quarter due to a higher mix of software and services revenue. In particular, our high margin solar revenue was up 16% year-over-year and storage software wins drove AUM up 66% year-over-year.
GAAP gross profit was negative $24 million, primarily driven by the net revenue reduction. Bookings in the first quarter were $24 million. As a result of our expansion to large-scale front-of-the-meter storage projects, the timing of our bookings has become increasingly variable on a near-term basis. Our average project size has tripled over the past two years and we have had a substantial number of projects in advanced stages of negotiations or that are expected to close in the near term. Given this strong commercial momentum, we remain confident in achieving our $1.5 billion to $2 billion bookings target for the full year 2024. Contracted annual recurring revenue, or CARR, was up 25% versus the first quarter of 2023. In the quarter, we implemented a proactive effort to upgrade the backlog to focus on the most profitable opportunities, which caused a slight reduction to CARR.
Stem, Inc. is facing a liquidity crunch despite growing demand for utility-scale energy storage. The company is set to generate $50 million in operating cash flow in 2024 with contracted annual recurring revenue set to reach $115 million exiting 2024 at minimum.
Revenue
Net income
(USD) MAR 2024 Y/Y CHANGE
Revenue
25.47M
-62.21%
Operating expense
43.82M
0.40%
Net income
-72.31M
-61.48%
Net profit margin
-283.90
-327.37%
Earnings per share
-0.24
-8.08%
EBITDA
-57.15M
-86.54%
Effective tax rate
-0.21% —
Cash and short-term investments
112.80M
-45.12%
Total assets
1.28B
-7.84%
Total liabilities
912.84M
4.10%
Total equity
372.05M —
Shares outstanding
161.65M
Institution holders
Schroder Investment Management Group 11.43M Dec 31, 2023 7.07% 13,717,584
AI
