It’s looking like yesterday’s 21.4% gain in Star Peak Energy Transition (NYSE:STPK) was just the start. STPK stock is up as much as 13% in pre-market trading. Between yesterday and today, we have some idea what is stoking the special purpose acquisition company (SPAC) shares.
It’s a bullish report from renown short-seller Citron Research on Stem, the target merger pick for Star Peak. Stem is an energy storage company with a focus on “battery storage systems, network integration and battery optimization.”
The company makes use of its Athena artificial intelligence (AI) platform to manage its systems. The platform is an operating system for energy distribution and storage systems, collecting big data that enables customers to alternate between onsite generation, grid power or battery power.
The SPAC merger will value the combined company at $1.35 billion. It will also set it up with $608 million in gross proceeds to make use of after the SPAC merger is complete.
How does Stem make money? One channel is by offering battery hardware produced by big name OEMs, such as Tesla (NASDAQ:TSLA), Samsung and LG. Stem buys them, retrofits them with its smart AI technology and then takes them out to customers banging down the doors.
Citron Sees Triple-Digit Gains for STPK Stock Price
Citron Research called Stem “the most compelling and real ESG stock on the market,” setting a $100 per share price target and noting:
“As the world moves away from carbon to wind and solar power, smart storage of clean power is more important than ever. The global energy storage market represents a $1.2 trillion opportunity and is expected to increase 25x by 2030. Without smart storage, the build out of renewable generation is not possible.”
The report described the company as the STPK is “the 800-pound gorilla in the power storage market.”
Citron is not alone in seeing smart energy storage as a critical element of President-elect Joe Biden’s $2 trillion green energy plan. The transition from fossil fuel-generated energy to clean power sources is problematic in that wind and solar require a cooperative mother nature. Absent that, battery storage solves the problem.
Taking a dig at QuantumScape (NYSE:QS), the solid-state battery maker that claims to have spent more than $300 million to develop its technology, Citron called it “nothing more than a science project with no revenue” until 2025. InvestorPlace contributor Lou Carlozo has similar sentiment, despite that tech firm’s back by none other than Bill Gates.
So, what to do here?
Citron’s $100 target is certainly a rich one and could be worth chasing, even with STPK stock’s two-day run-up. However, I recommend buying the dip on this one. While there’s much to like about Stem and its innovative storage strategy, it’s better to buy it a little cheaper.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.