In many ways Star Peak Energy (NYSE:STPK) stock reminds me of a movie.
In one of the pivotal scenes from the science-fiction film “Interstellar,” the protagonists find themselves needing to dock their spacecraft with its main station that went ballistic following a catastrophic accident.
Given the drastically different rotational accelerations of the two crafts, the main character was warned that docking was not possible, to which came the response, “No, it’s necessary.”
Here’s the deal – green energy solutions have been gaining momentum. Obviously, you have the Biden administration, which reinstated the U.S. participation in the Paris Agreement. Although it might largely be a symbolic gesture, it demonstrates the intention of the Democrats to implement cleaner energy infrastructures.
While the political discourse remains vitriolic at times, even Republicans drive electric vehicles. Therefore, we’re moving toward an environmentally friendly future, benefiting STPK stock and similar investments.
There’s just one problem with this thesis and it has nothing to do with politics: The math for renewable energy sources like wind and solar just doesn’t stack up. According to the Office of Nuclear Energy, nuclear power is the most reliable energy source by a country mile, featuring a capacity factor of 92.5%.
On the other hand, the worst is wind and solar, with capacity factors of 35.4% and 24.9%, respectively. True, technology can improve the efficiency and capabilities of green power sources, but there’s only so much that can be done. I mean, tech can’t make the sun stay up longer or the wind to be windier.
What can be done, though, is to improve storage capacity. Herein lies the fundamental bullish thesis for STPK stock.
As you might guess from its bizarro name, Star Peak is a special purpose acquisition company (SPAC) that will reverse-merge with Stem, a smart energy storage and management services provider.
STPK Stock: Fundamentals and Technicals Clash
Earlier this year, I labeled STPK stock as an investment on a truly practical solution regarding a green energy infrastructural buildout. Mainly, I said this because no matter how effective solar panels become, for instance, you still need a mechanism to harvest that energy for later use.
The intermittence of renewable energy is a long-recognized challenge. However, it came to a head during the California rolling blackouts and most recently, the Texas winter storm.
Please hear me out – I’m not saying that renewable energy caused the blackouts. Instead, I’m saying it’s not helpful to just have renewable energy without a way to harvest that energy for emergencies or high-demand situations.
This is precisely what makes STPK stock so compelling. One of Stem’s key businesses is energy storage and backup power – both critical elements if the green revolution is to have any legs against nuclear or combustion-based power. As you know, the fossil fuel industry stays relevant because of the underlying source’s high-energy density.
That’s why I made the reference to “Interstellar” – or at least that one scene with a great accompanying piece of music. If green energy is to become our main power source, we must have robust storage infrastructures. There’s no way around this.
Yet the one group of people – the people that matter the most – that have apparently not received this memo is the investment community. Call me crazy (and I’m sure you do just that and much, much worse) but STPK stock looks like it’s printing a bearish head-and-shoulders pattern.
Narrative-wise, I must admit I don’t understand it. Yes, the market is getting SPAC crazy, but Stem is a legitimately strong business that has a long upside pathway.
Also, certain pundits blamed renewable energy for the troubles in Texas. I don’t think it’s a reasonable argument but hey – you repeat something on Fox News long enough and it will become truth to many (and with a passion, I might add).
Adopt a Tactical Approach With Stem
Despite the ominous implications of the head-and-shoulders pattern, I still like the fundamentals for STPK stock. Again, the underlying business represents a development that must happen for green anything to be possible.
Still, here’s the harsh reality of the market. You can argue the fundamentals inside and out as many other bullish analysts have done. But what this crazy season has taught me is that, at the end of the day, it comes down to what the market is willing to pay.
Unfortunately, it doesn’t appear willing to trust STPK stock, which is a real shame. That’s why irrespective of my belief in Stem’s business model, I can’t in good conscience write about the company’s transformative nature without mentioning the technical risk.
The good news is that if STPK does fail in the nearer term, it’s a great opportunity. Be sure to keep your powder dry for when the seemingly inevitable discount comes.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.