Stem: Revenue Surge, Fatter Margins And War

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Stem's (NYSE:STEM) net proceed to impressment pinch hyper-growth connected nan backmost of nan greenish modulation now inherent successful nan operational momentum of nan smart power retention firm. The figures for its precocious reported fiscal 2022 4th fourth were beardown with gross surging by astir 200% complete its year-ago comp and gross profit margins signaling a affirmative 1100 ground points move. The ramping figures person been group against nan backdrop of commons that whilst up 15% year-to-date are down 46% from their 52-week high.

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I'm bullish connected STEM banal and judge nan greenish modulation presents a beardown opportunity to put successful nan reconstruction of nan world power architecture astir an electrified little c and yet much sustainable footing. Critically, Stem now stands to beryllium boosted by adjacent multi-decade themes that person turbocharged nan greenish modulation and person fundamentally knocked years disconnected nan timeline for nan take of star energy.

Revenue Growth Comes In Strong As Profitability Expands

Stem reported gross of $156 million for its fiscal 2022 4th quarter, a maturation of 196% complete nan year-ago play but a miss connected statement estimates for gross of $166.43 million. Bookings grew by 111% year-over-year to scope $458 cardinal pinch contracted backlog increasing by 116% to scope $969 cardinal from nan year-ago figure.

Inflation Reduction Act star and retention buildout


At nan halfway of this maturation is nan accelerated buildout of star and retention arsenic nan accumulation taxation in installments provided by nan Inflation Reduction Act (IRA) gears up to activity its measurement to disperse and derisk planned finance superior successful nan greenish power source. Stem now expects nan IRA to summation star positive retention by 46% done 2032, a move that would underlie nan maturation of nan company's Athena package business.

The institution faced immoderate proviso concatenation issues during nan 4th pinch interconnections and permitting remaining slow conscionable arsenic labour readiness issues for its partners besides came into nan dynamic. GAAP gross profit separator came successful astatine 8%, up from antagonistic 2% successful nan year-ago play arsenic higher separator work revenues moved to represent a larger stock of full revenue. Contracted yearly recurring gross grew to $65 million, sequential maturation of 7% complete nan 3rd 4th connected nan backmost of package and services gross of $16 cardinal during nan 4th quarter. This represented astir 10% of full gross and is group to move higher successful nan coming earnings.

Stem fiscal 2022 4th fourth package and services revenue


Athena, Stem's AI-driven artillery optimization package platform, lays astatine nan bosom of nan company's semipermanent bull case. This conception will do astir of nan dense lifting for gross profit description and eventual affirmative rate flows. Hence, its quarter-on-quarter maturation complaint will beryllium nan cardinal driver of Stem's expertise to build early shareholder value. Growth sped up sequentially, increasing by 17% complete nan 3rd 4th from a maturation of 9% complete nan 2nd quarter. The institution besides completed its first FTM software-only task successful ISO New England and stated it intends to pursuit much of these types of deals successful nan future.

The Green Energy Adoption Has Been Brought Forward

Stem's nett nonaccomplishment fell by astir $1 cardinal from its year-ago fig to scope $35 cardinal pinch adjusted EBITDA antagonistic astatine $10 million. This was down from a antagonistic adjusted EBITDA of $12 cardinal successful nan year-ago period. The results were patient pinch enhanced operating gearing allowing for a little nett nonaccomplishment moreover against higher revenue. However, nan commons are presently down astir 7% successful pre-market trading arsenic investors respond negatively to nan gross miss. This is understandable arsenic underperformance of expectations by a precocious maturation ticker is almost ever met pinch a reset of first expectations. This will proceed to shape a cardinal consequence for Stem. However, I deliberation this misses nan larger image astir nan changes nan institution is making to its business to embed greater profitability whilst riding nan larger and fast-expanding TAM for smart power storage.

The institution ended nan 4th pinch rate and equivalents astatine $250 million, astir 16% of its existent $1.58 cardinal marketplace cap. This came arsenic guidance successful their net telephone for nan 4th guided for fiscal 2023 gross to travel successful astatine astir $650 million astatine nan apical extremity to spot their guardant 1-year price-to-sales aggregate (PS) astatine 2.43x. This is against a PS ratio of 4.35x against nan full-year fiscal 2022 gross of $363 million.

Critically, nan displacement to renewable power is now codified successful US authorities done nan Inflation Reduction Act pinch request further brought guardant by Russia's warfare successful Ukraine. The conflict and consequent power warfare person highlighted nan request to displacement from a mine-and-burn hydrocarbon system to a much sustainable low-carbon greenish power economy. I stay bullish connected Stem and deliberation vulnerability to nan increasing marketplace for power retention forms an important and overlooked constituent of nan greenish transition. The institution fits wrong my ambiance system portfolio good and will shape a semipermanent clasp arsenic nan modulation takes root.

This article was written by

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The equity marketplace is an incredibly powerful system arsenic regular fluctuations successful value get aggregated to unthinkable wealthiness creation aliases demolition complete nan agelong term. These 2 polarising forces laic astatine nan halfway of my banal coverage. The purpose is to debar wealthiness demolition and clasp wealthiness creation. I chiefly attraction connected sustainable companies, maturation stocks, deSPACs, and income investing.

Disclosure: I/we person a beneficial agelong position successful nan shares of STEM either done banal ownership, options, aliases different derivatives. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

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