Stem (STEM -4.05%) has an innovative tool that helps utilities and commercial power users get the most out of their energy. In this clip from "The High Energy Show" on Motley Fool Live, recorded on May 31, Fool.com contributor Jason Hall discusses why this is a great business model for the energy company.
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Jason Hall: Stem went public via SPAC. I think it's taken a little bit of a beating because of that, but if you look at the people that led the SPAC, one of the board members and former President of Kinder Morgan. These are people that understand the energy industry. What does STEM do? STEM's core business is helping utilities, grid operators, and large commercial power users, think like Amazon and Walmart and those companies, and Alphabet, access batteries, buy utility-scale batteries, commercial-scale batteries, and then manage them effectively. The real key here is the management side, they have a tool called Athena, it's artificial intelligence, SaaS, business model, so software as a service, typically 10-15 plus year contracts, and then instead of having to have a person who's got their hand on the lever, so to speak managing when you're storing energy, managing when you're deploying that energy, Athena is able to make the decisions based on market demand, based on rates, based on your needs. Whether you're a utility or whether you're a commercial power user, to get the most out of that stored energy, so it's a great business model.
Growth has been just absolutely phenomenal, the stock has been killed because it's a SPAC, It's been tied up in a lot of that. It was very irrationally exuberant, high priced. It's come down even though the business has done well, recently made a pretty large acquisition to get into managing solar assets as well, a business called Also Energy that it acquired. That definitely affected its balance sheet, taking a pretty large amount of cash and taking on some debt now to do that. But I think that combined business has a lot because two separate businesses that didn't compete, but also some overlap for the same customers, and a lot of customers that do business with one and not the other. There is a tremendous amount of opportunity, and it helps companies solve some very real problems that have prevented them from going deeper into renewable energy by providing them with the tools to manage those assets, so I'm a really big fan of STEM.
