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Stem | Assessing their Q2

Stem Inc (NYSE: STEM) is the first public pure play smart energy storage company, which delivers and operates battery storage AI solutions that maximise renewable energy generation and help build a cleaner, more resilient grid. Their customers include Fortune 500 companies, project developers, utilities, and independent power producers. Stem’s market-leading Athena software helps lower energy costs and solve renewable intermittency across the world’s largest network of distributed energy storage systems.

(Source Stem Inc)

The company entered the public market through a SPAC listing, officially listed at the end of 2020. The shares went from $10 to over $45 in the first three months of trading. However, shares have since slipped, seeing them below $7 during June 2022.

(Source: Google Finance)

Stem Inc released their Q2 on 04 August 2022, with investors taking the price over 17% following trading with shares finishing at $14.35 as of 05 August 2022 (a gain of 90% in the last month). What investors were likely most reassured by is the significant growth in Q2 revenue which gained 246% YoY to $66.9m, from $19.3m in last year's quarter - paired with an improvement in their net losses during the same timeframe. Net losses were ($32m), down from ($100.2m) in last year's quarter. This meant their net margin loss decreased from (519%) to (47.8%).

(Property of EcoShares)

The improvements suggest Stem's business strategy is rapidly picking up revenue streams and could be forecast to break even if their net loss improvements continues its trajectory. Looking deep into their financial numbers, it could be argued that Stem's current liquidity is becoming more strained - especially with rising interest rates and economic uncertainty. In the short term, the current assets and current liabilities can measure a company's ability to pay short-term debt or obligations due within one year. Stem's short-term liquidity percentage in Q2 was 41.6% (current liabilities/current assets). This compared to last year's quarter, which was 30.1%. Current assets and current liabilities stand at $541m and $225, respectively.

(Property of EcoShares)

Considering Stems long-term finances, something to note is that their cash levels have fallen during the year so far to $335m, which was down from $474m in last year's quarter.

This might worry some investors as to whether Stem will eventually need to rely more on liabilities or other ways to raise their cash levels.

Despite this, total assets have been increasing four quarters in a row to $1,427m - which represented a 104% rise in a year. Total liabilities have inflated to a current level of $823m - but the good news is their long-term liquidity percentage decreased to 57%, down from an alarming 80% in last year's quarter.

(Property of EcoShares)

Stem release their Q3 earnings for the year on approximately 07 November, 2022.


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