Prior to releasing its first quarter financial results, Stem Inc. (NYSE:STEM) stock was trading down for 2021. That changed when the company posted positively trending financial results.
Now stock is climbing and it’s likely that this is only the beginning of the run for Stem.
In the quarter that ended on March 31, Stem delivered revenue of $15.4 million, which was an increase of 275% from a year ago.
Stem is the first pure play smart energy storage company to go public. The company delivers technology solutions for battery storage and optimization. This is the “holy grail” so to speak if renewable energy is going to live up to its promise.
But for several reasons, Stem has been overlooked by investors in 2021. For one thing, investors became disillusioned with special purpose acquisition companies (SPACs). It also became apparent that the electric vehicle (EV) revolution, while real, may be further off than initially thought.
And then the threat of inflation did steer some investors out of growth stocks. All of these reasons were contributing factors in the volatility surrounding STEM stock. After closing at near $50 per share in mid-February, STEM stock sold off and was negative for the year as recently as May 18.
But the long-term narrative for Stem is all that matters. And that is a narrative that looks as strong today as it did when I first wrote about the stock in April.
The Future of Energy Runs Through Stem
Renewable energy will be one of the most profitable growth opportunities for the next decade. Revamping America’s energy grid, electric vehicles and the growing Internet of things (IoT), are three reasons why there will be a demand for electric power.
And the story of this sector is about that demand more than supply. Specifically renewables like wind and solar have to be stored and optimized so that they are available even when conditions don’t allow for power to be generated (e.g. the wind is not blowing; the sun is not out).
Stem is the unquestioned leader in this space and has the clients and revenue to show for it. Furthermore, Stem sees the energy storage market as being a $1.2 trillion opportunity by 2050.
A Sneaky Play on Crypto Mining?
The demand for crypto mining is likely to increase. However, crypto miners are going to have to figure out a way to manage the energy and semiconductor chip consumption that is drawing the unwanted attention of world governments.
One way that crypto minders are attempting to work around this is to harness the excess solar and wind power that is left over after being created in peak hours. It’s too early to tell if this will be a market for Stem, but if it does, Stem will likely have a role to play in helping these companies optimize the way this energy is used.
STEM Stock Is Primed to Move Higher
In a market that is filled with a lot of hype masquerading as hope, I tend to be reluctant to get overly bullish on any stock. That being said, I thought STEM stock was being overlooked a month ago, and I still feel that way.
The company has taken an important step by delivering positive financial results. Although the company is not yet profitable, it’s not a pre-revenue company. And that revenue is clearly growing. This supports the case that it may be able to meet their very bullish projections. The stock is up 44% since May 13.
If, as some suspect, traders begin to shift away from cryptocurrencies back to growth stocks, Stem is likely to draw attention. When it does, the stock has much further to run. If you’re interested in a breakdown of just how high STEM stock may rise, I’d encourage you to read this article by Mark Hake.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.