Stem (NYSE:STEM) will dominate the clean energy landscape, especially in the long-term, as demand for its cutting-edge services only increases. Not to mention, STEM stock is currently popping after Goldman Sachs initiated a “Buy.”
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Now, it’s no secret that the future will be powered by clean energy sources. It’s just a matter of how and when.
Which energy sources will primarily power society, and how long will it take us to get there?
Stem’s Unique Position in the Clean Energy Realm
Luckily, the longer this future takes to get here, the greater space Stem can carve out for itself in an industry that will grow massively in the long run.
The world is pivoting toward clean energy sources, such as solar and wind, but these energy sources are intermittent.
So, if the energy isn’t used, it’s lost. And the rate of clean energy waste is staggering. In 2017, 45,000 California homes could have been powered for a year with the renewable energy California generated. And this rate was up from previous years.
And this is where Stem’s AI-powered batteries come into the picture.
Stem’s long-term potential depends on the energy-creating companies needing to store the energy they create.
This all seems too easy for Stem to capitalize on.
And yet, nobody else does what Stem does.
Stem is not only the first-mover in this market with the most market share, but they also have developed a tech advantage with their Athena AI “brain” that optimizes power efficiency.
Thanks to artificial intelligence and machine learning trained on “tens of millions of system runtime hours across 40-plus utility territories,” companies utilizing Stem’s technology save up to 30% on energy bills. The Athena software does this by switching between battery power, onsite generation and grid power in a maximally efficient way.
Oh, and if that wasn’t enough, costs of Lithium-ion batteries have plummeted in recent years. This alone is great news for STEM stock.
Already a Dominating Force
Founded in 2009, Stem’s leadership team consists of industry veterans, and its roster recently expanded to include an experienced VP of Corporate Development and Chief Legal Officer.
It operates in four countries, nine states, and over 200 cities, catering to a market that will grow 25x by 2050.
And currently, it has more than 950 systems in place — the largest smart storage network in the world — managing 1 gigawatt-hour of energy. Worldwide clean energy battery storage solutions are expected to grow to 175 gigawatt-hours in 2030, from 2 gigawatt-hour in 2017.
Stem will be on the forefront of this clean energy storage expansion.
It’s already working with big-name corporate clients such as Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), Apple(NASDAQ:AAPL) and Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL). And its reach extends far beyond corporate clients into the realm of utilities and asset owners.
Oh, and they have zero debt and great financials.
As mentioned earlier, Stem controls all facets of their smart energy storage. It takes care of hardware and network integration, which has a 10%-30% gross margin.
It creates the software for said hardware, and upsells its brilliant Athena software solution, which has an 80% gross margin.
These margins will only improve as energy and hardware costs decrease over time.
Bottom Line on STEM Stock
Other great news for STEM stock? It really doesn’t matter where the energy it stores comes from.
Solar companies are tied to solar technology. Wind companies deal with wind. But Stem is immune to fluctuations in solar technology and benefits from the steady improvement, overall, in clean energy generation.
Despite renewables accounting for roughly 68% of 2020’s newly added power sources, they still account for only 13% of power generated.
Clearly the need for both clean energy and clean energy storage continues to skyrocket.
Stem nails the latter, and also handles utilizing the energy it stores in the most effective way possible.
Because of these reasons, and they’re current market dominance, Stem has a clear pathway to being the global leader in a multi-trillion-dollar industry.
It has a very attractive hardware-and-software business model with high gross margins that will lead to huge profits at scale.
This is the type of stock you want to buy and hold for the next decade, and the kind of stock regularly featured in my Innovation Investor portfolio. It’s a millionaire-maker stock.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this video.
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