Among the big gainers in today’s market is renewable energy and storage company Stem (NYSE:STEM). Shares of STEM stock climbed as high as 15% today. Now, shares are up 10% as investors price in a very bullish upgrade.
Morgan Stanley analyst Stephen Byrd believes Stem’s discounted valuation doesn’t fundamentally reflect its growth prospects over the longer-term. Byrd is one of a number of analysts that take the view that clean energy technology may be poised for significant catalysts in the years to come.
For one, there’s the Inflation Reduction Act (IRA), which increases public funding to this already-hot sector. Then there’s improving economies of scale, leading to margin improvement and profitability that may come sooner than expected.
The other company receiving an upgrade today from Byrd is Bloom Energy (NYSE:BE), a renewable power generation company.
Let’s dive into what investors may want to make of these upgrades today.
Is STEM Stock a Buy Here?
One thing that’s for certain is that clean energy has some very strong secular catalysts. As far as growth sectors are concerned, this is one space that long-term investors may want to start nibbling at. Indeed, given how far the sector has fallen in 2022, this year may provide a nice entry point for investors with a reasonably long investing time horizon.
It’s clear that the highly discounted valuations Byrd speaks of have some investors interested in this space. However, from a momentum standpoint, there’s little to like about the price action of the sector. Most stocks continue to make lower lows, despite a nice uptick today.
Perhaps interest around clean energy stocks may be starting to make a comeback. A few more bullish analyst notes and we could be at the beginning of a nice run in STEM stock. However, as we’ve seen with other bear market rallies of late, it’s probably too early to call the bottom, although it does make sense to start easing into this name over time.
On the date of publication, Chris MacDonald did not hold (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.
