After two positive weeks in a row, the major U.S. stock indexes fell last week on mixed economic data as recession concerns intensified. Investors are worried that recent mixed inflation data could challenge the Federal Reserve’s expectations of slowing the pace of interest-rate increases. For the week, the Dow shed 2.8%, the S&P 500 fell 3.4%, and the Nasdaq lost 4%.
In the coming days, investors will be focused on the latest inflation data due for release and the two-day Fed policy meeting, with central bankers expected to announce an interest rate decision and near-term projections for the U.S. economy on Wednesday. Fed policymakers are widely expected to hike interest rates by an additional 50 basis points in their ongoing effort to tamp high inflation. This will be the seventh and final rate hike for 2022. The Fed has raised its benchmark rate by a cumulative 375 basis points so far this year, in the fastest tightening cycle in over 40 years.
Since the U.S. government officially introduced the first-ever tax credit for clean energy storage projects, there have been remarkable positive business developments in the industry. 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. This week’s first recommendation is a pure play on advanced energy storage with enormous upside potential.
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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, up 191% from $250 million at the end of Q2 2021. Bookings were up 402% from $45 million to $226 million, and the 12-month pipeline increased 8% from the previous quarter to $5.2 billion. Revenue grew a whopping 246% year-over-year and came in 5% above the high end of guidance at $67 million.
We are encouraged by Congressional support for the Inflation Reduction Act of 2022. The climate provisions in the Act would drive continued investment in America’s aging power grid, support customer adoption of renewable energy, and improve energy security by incentivizing development of our domestic supply chain. Importantly, a stand-alone Investment Tax Credit (ITC) for energy storage, and the extension of the solar ITC, would improve the economic returns for our customers.”
“Supply chain constraints, permitting and interconnection delays, and certain regulatory actions continue to pose challenges, but we believe we remain well-positioned to manage these risks and continue with our strong execution through the rest of 2022,” commented John Carrington, Chief Executive Officer of Stem.
STEM has high growth potential and looks like an ideal long-term investment. The company’s Athena platform seems like an industry changer 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. Of the 11 analysts covering the stock, 9 rate it a Buy, and 2 rate it a Hold. There are no sell ratings for STEM. A median price target of $19.50 represents an increase of 85% from Friday’s closing price.
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37 U.S. states and four U.S. territories have laws that permit the use of marijuana. While it is still illegal on a Federal level, President Biden’s recent proclamation included a request for the attorney general “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.” Many see this as a significant step in the right direction, but it’s expected to be a slow road.
Potential legalization of cannabis is likely to be a major positive catalyst for the leader in net cannabis revenue, Tilray (TLRY). The company has a presence in all key markets, with a focus on recreational and medicinal cannabis; the addressable market is significant and expanding.
TLRY surged following the recent announcement that President Biden would encourage the reassessment of marijuana laws but gave back some of those gains when the company reported Q1 2023 revenue and EPS misses. The company has its sights set on Revenue of $4 billion by 2024, a realistic target if regulatory hurdles wane. At $3.48 per share, TLRY currently trades at -6.5x forward earnings. The stock remains deeply oversold and is worth buying even after the recent uptick.
Global healthcare leader Eli Lilly And Company (LLY) has been creating high-quality medicines for over a century. The drug firm focuses on endocrinology, oncology, neuroscience, and immunology. Key products include Trulicity, Jardiance, and Humulin for diabetes; Taltz and Olumiant for immunology; and Verzenio and Alimta for cancer.
The mega-cap pharmaceutical giant’s pipeline is locked and loaded with promising advancements, which means plenty of potential upcoming opportunities for investors to benefit from. In the first half of 2022, Lilly received word that the FDA was fast-tracking its investigation of tirzepatide. A drug designed to treat adults who are overweight with weight-related comorbidities such as diabetes. Eli Lilly expects its rolling application to be completed by April 2023.
JPMorgan analyst Chris Schott recently summed up his bullish outlook on LLY. The analyst believes that Eli Lilly remains the best-positioned growth story in his coverage and one of his top picks following the stock’s pullback over the past month. The analyst sees a “significant opportunity” for Tirzepadite in type 2 diabetes, and obesity, which in his view “warrants increased attention.” Schott currently gives the stock an Overweight rating and a $300 price target.
Lilly’s share price is up nearly 33% in 2022 and seems likely to continue to gain steam into the new year. The stock sports a dividend of $0.98 or 1.21% annually. LLY’s dividend payout for the year is set for the low 40% range, which should allow for robust future dividend growth.
A strong pipeline and a stable dividend make Eli Lilly an attractive consideration. The pros on Wall Street also think so. Among 17 polled analysts, 14 say to Buy LLY, 2 call it a Hold, and only one rates the stock a Sell. A median 12-month price target of $351 represents a 9% increase from its current price.