Bringing stock Stem Energy to the Board

[posnertive1]

Stem Energy is a stock being brought to the market thru a SPAC called STPK. Stem Energy is a market leader in AI-driven clean energy storage services. It was founded in 2009, and “generates revenue by providing customers with integrated energy storage systems, long term recurring software services and energy market participation through it’s propietary software platform, called Athena(it’s secret sauce, my take)which enables AI-automated systems operations. The company empowers it’s customers(30 of the Fortune 500 companies use Stem such as Amazon, Walmart, and UPS)and partners to optimize energy usage by automatically switching between battery power, onsite generation and grid power.”
The Biden administration, wants green energy solutions. The issue is, this would be wind and solar, however, what do you do when the wind don’t blow and the sun don’t shine? The answer is the energy can be stored in batteries and used when needed. Or to manage power outages. And with Athena software, it can help to avoid peak charges, manage grid connection costs, and monetize flexibility in markets. I believe it is saving it’s customers up to 30% on energy costs.
Stem has a strong balance sheet
$525 million net cash available for growth.
$0 Debt on balance sheet
Stem has 10-30% Hardware gross margins
Stem has 80% software gross margins, with a recurring SaaS model.
100% attach rate secured by 10-20 year contracts with monthly recurring cash flow.

As of jan. 17, 2021, 182 projects in process.
100% of 2021 Revenue in contract backlog.
Revenues in 2020 were $36,307,000, nearly double revenues in 2019 at $17,552,000.
On march 15, Stem’s guidance unchanged, including 4X annual revenue.

Stem’s TAM, is enormous, it’s storage solutions address a $1.2 trillion dollar opportunity for leading 500 Fortune companies, commercial and industrial customers, indepemdent power producers and renewable asset owners, among others.
Stem Co. currently has a 75% market share in the California commercial and industrial storage market, the largest energy storage market in the U.S… They are the company that is helping California which had so much blackout problems in the state last year. Stem has a first mover AI software platform, has operated globally with over 40 utilities and 16 million runtime hours across it’s customer base.
I live in Texas now, and Stem Inc. would for sure be a solution needed for our power grid problems.
Also, battery storage capacity is expected to increase 25X by 2030.
I am not a techie or a writer, but I am excited by this stock that will IPO thru STPK by the end of april. This is my first attempt to give something to the board of which I am so impressed.

Thanks to Saul and people on this site,
Ron

[Softie]

Thanks for sharing this, Ron. I found this presentation on their investor site, which gives a lot of the numbers you cited but doesn’t elaborate much: https://3zkqyz2t3xwi492ll518psvq-wpengine.netdna-ssl.com/wp-…

One thing that jumped out at me was forecasting a 51% CAGR in revenue from 2021-2026, but under the hood that is heavily front-loaded. From page 20:
Revenue growth by year
2020 | 107% (actual)
2021 | 304%
2022 | 115%
2023 | 67%
2024 | 42%
2025 | 26%
2026 | 24%

Setting aside the reliability of making forecasts 5 years out, what do we make of this, especially in light of the massively increasing TAM they propose? They are suggesting roughly linear growth in revenue (see page 18), and sub-linear growth in the hardware revenue that will be by far the biggest contributor during the time horizon. If I had to guess, the argument would be that decreasing hardware costs will put a ceiling on the upfront project costs, but the recurring revenue from software will accelerate as their network becomes larger and enables smarter management and selling back into the grid. So the real growth story will take hold 5-10 years from now. But love to hear other thoughts.

Very exciting to me as a proponent of green energy, but I’m nervous about the reality of the software-driven growth story. Will keep digging into it.

[12x]

I did own Stem for a while, but sold and don’t plan on buying back for the time being.

Although Stem has large market share in California, Tesla Autobidder is already managing twice the energy storage that Stem predicts to end this year with. (1.2GwH for Autobidder vs. 615 MwH for Stem 2021 forecast).
https://electrek.co/2021/03/16/tesla-autobidder-managing-ove…

I believe Tesla will be a formidable competitor in this winner take all/most market.

Stem tried to put itself up for sale over a year ago in an effort to try and expand with the resources of a large company. The fact that they were seeking a buyer rather than VC Funding/IPO path is not inspiring to me: https://www.greentechmedia.com/articles/read/stem-confirms-i…

They are already missing their forecasts. Bookings for 2020 was a miss, at $137.6m vs estimated $145m. Future guidance for 2021 and beyond is unchanged. I put absolutely no weight in these forecasts for big numbers that these SPACs are throwing out.

[Robworldwide]

While I understand the sentiment that you “don’t trust SPACs”, let’s not throw the baby out with the numbers, er, bath water! “SPAC” isn’t necessarily a pejorative.

If you’re questioning STEM because they missed earnings, that’s fair as a start for debate. My rebuttal would be that the miss isn’t nearly as important as the TAM they’re chasing or the revenue they already have booked for 2021. Plus, I’m taking a longer view then 1 miss. To you, the fact that their guidance remains the same was a concern, but I’m reassured their guidance hasn’t changed! Even if they missed again for every quarter in 2021 by the same magnitude of the miss you’re referencing, that would still be phenomenal growth (though we could debate if this is baked in to the stock price already, but at current valuation, I don’t think so).

The guidance, btw, was issued pre-tie up with STPK (which only occurred in December) by the same skilled CEO and robust board (which will be largely similar in composition) that will lead post merger further making the point that this isn’t necessarily a case of SPACs throwing out wild numbers.

You mentioned Tesla was your favorite here; Mine too! But (and I mean this respectfully, please educate me!) what makes you think this is a winner/take-all market? The TAM is huge and there will likely be room for many players, be it software, hardware, or hybrid solution. I’m long TSLA for many reasons, but have a starter stake here; In the same way I’m long TSLA but also have some grist in NIO and XPEV. FWIW, your figures for how much power Tesla has under management (1.2Gwh) seem to be mostly in Southern Australia, with a small contribution thus far from Europe (I do acknowledge they are building infrastructure in America right now, including probably Texas) so STEM having a 75% market share in California right now is impressive, and the gap in America won’t necessarily be large… and it is in this country, with the political tailwinds that I think are afoot, that might drive both these companies forward in this space (though STEM too is chasing international markets, having already opened contracts in Japan and Canada).

I think there’s room for both STEM and TSLA in this space (and I’m of course not suggesting that this would be a reason to suddenly get bull on TSLA if you weren’t already!). But I like STEM’s cash on hand, the 0% debt, and the positioning I see so far. I’m still in the small position/accumulation phase, but it’s firmly on my radar for a position I may be gradually build out on strength as the story develops.

Happy Easter, everyone.