Daily Stock Pick: November 9th, 2022

One of the most significant challenges associated with clean energy is the intermittency of its sources. The sun doesn’t shine all the time, and the wind doesn’t always blow. Energy storage is the solution that allows excess energy to be stored, enabling continuous power output at all times, making clean energy as reliable and consistent as fossil fuel.

At the end of 2021, the global installed energy storage capacity measured about 46 GWh.  According to InvestorPlace, a meager 1.5% of renewable energy production in the world is backed by energy storage today. As governments and corporations worldwide strive toward carbon neutrality, that figure is set to grow exponentially. Bloomberg New Energy Finance targets at least 800 GWh of global energy storage capacity by 2030, indicating 17 times growth over the next ten years.  

Since the U.S. government officially introduced the first-ever tax credit for energy storage projects, there have been remarkable positive business developments in the industry. Our recommendation for today is a company gaining traction as plans for much-needed upgrades to the nation’s aging power grid unfold.    

Stem Inc (STEM) is a pure play on the smart energy storage space offering artificial intelligence-driven clean energy storage systems. The company’s advanced energy storage solutions with Athena(TM), an artificial intelligence-powered analytics platform, enables customers and partners to optimize energy use by automatically switching between battery power, onsite generation, and grid power.

The company has already built up considerable infrastructure with established names. STEM’s Athena Software seems likely to become mission-critical for many electric utilities because of the rapidly increasing supply and demand for renewable energy.  

For the third quarter, Stem reported a record-breaking backlog of $727 million, more than double compared to the same quarter last year. Bookings were $223 million, more than double, and the 12-month pipeline increased 8% from the previous quarter to $5.2 billion. Revenue was above the top end of management’s guidance range for the third straight quarter at $99.5 million. 

“We expect that the climate provisions in the Inflation Reduction Act will drive continued investment in America’s aging power grid, support further customer adoption of renewable energy, create additional clean energy jobs, and improve energy security by incentivizing the ongoing development of our domestic supply chain. We have started to see an increase in demand from our customers following the passage of the Act, as evidenced by the 29% sequential increase in our 12-month pipeline,” commented John Carrington, Chief Executive Officer of Stem.

STEM has high growth potential and looks like an ideal long-term investment. Athena is looking like an industry-changing platform with wide-ranging applications. STEM’s infrastructure is far ahead of its competitors and will likely prove to be a crucial piece of the investment thesis moving forward.