![]() The gross margin is around 80% for the software service.ģ. No existing clients have quit using Athena and Stem generates monthly revenue from clients on top of the upfront installation fee component. Athena has the ability to automatically switch between battery power, generation power, and onsite grid power where it can save clients between 10% and 30% monthly by storing and releasing energy automatically. Software: The brain of Stem is its Athena AI software platform where it is running a SaaS model with contracts secured for up to 20 years. The hardware segment has the lowest margin, between 10-30% because Stem is just the intermediary.Ģ. The Company increases profits with hardware revenue associated with partnership arrangements with the suppliers. Hardware: Stem partners with various battery storage providers (Tesla, LG, Samsung, Panasonic, Powin Energy, and so on) to sell their hardware equipment directly to various clients (solar developers, asset owners, utilities, etc.). The company operates through three segments: Hardware, Software, and Market Participation. In 2020, a 107% increase in revenues was primarily driven by hardware revenue related to standalone systems in the FTM market. In addition, Stem is working with 40 utilities, 5 grid operators, and over 30 Fortune 500 companies in both Front-The-Meter (FTM) and BTM markets. C&I projects are Behind-The-Meter (BTM) and Stem is the largest software player in the BTM battery storage market. ![]() Stem is currently the battery storage software leader, particularly in the commercial and industrial (C&I) space. In addition, the company has plans to expand its footprints in different states in the U.S., including Texas and New York, as well as other regions in Canada, Australia, Europe, South America, and Latin America. The current bookings are able to fully cover the 2021 forecast sales and the company is already working on signing deals for 2022. Highly visible growth: Stem is forecast to achieve a 50% revenue CAGR from 2021 to 2025. Strong balance sheet: Post Star Peak Energy Corporation merger on April 27th, 2020, Stem has no debt and $525 million cash sitting on the balance sheet to deploy to continue investing in R&D or potentially acquire others in the Battery Energy Storage Systems (BESS) space as the Company just hired the former Business Development veteran, Matt Tappin from Royal Dutch Shell, this past May.Ĥ. ![]() It is getting smarter each day as more data can be collected.ģ. Close to 1,000 projects are running Athena with 700,000 data points being analyzed each second. ![]() Also, 25 issued patents and 31 pending patents are going to keep the Athena software competitive while protected in the marketplace. An 80% margin is expected for the software segment with 50 software developers supporting and innovating the technology. The market is starting to recognize the value of Stem's Athena software. Proven technology moat: The engine of Stem is its AI technology with ten years of successful testing and data analysis. The Company is currently a battery storage software leader and expects to remain as one of the leaders in the future to capture the huge market opportunity globally as it expands its footprint in different countries and market segments (large utility projects and residential markets).Ģ. Large addressable market: Stem is operating in a $1.2 trillion total addressable market by 2050 and the global battery storage market alone is expected to see a 25 times increase in the next 10 years. My recommendation relies on the following key catalysts:ġ. The target price is based on a Relative Valuation. ( NYSE: STEM), with a one-year target price of $73.36, presenting a 109% upside potential on the closing price of $35.09 on June 18th, 2021. I issue a BUY recommendation for Stem Inc. Petmal/iStock via Getty Images Investment Summary Active contributors also get free access to SA Premium. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Editor's note: Seeking Alpha is proud to welcome Brendan Du as a new contributor.
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