Stem (STEM 14.98%) has a compelling AI-powered software tool called Athena that is setting it apart in the energy market. In this Motley Fool Live segment from "The High Energy Show," recorded on June 28, Fool.com contributor Jason Hall takes a closer look at Stem's business.
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Jason Hall: I have to talk about Stem here. Because I think it's gotten to a point where Stem and their business is, so they lead with batteries, energy storage, but they don't look to try to make a lot of money on batteries. They've got good relationships with a lot of battery suppliers. Their differentiator is Athena, which is their AI-powered software that manages the energy that you put into those batteries. Whether you're a utility and you're trying to meet that grid need or whether you're a power user, a commercial user and you're trying to minimize your expense. Whether you are participating in the market and selling the energy. Athena is this wonderful AI tool that handles that for pretty much any stakeholder out there's looking at energy storage. They sell it on 20 year contracts, so it's a high margin SaaS business.
Travis Hoium: It's an energy company that has a software product.
Jason Hall: Exactly, I think it's a software company that has an energy product. I think really how you have to think about it. Because every time it sells a battery, it adds 20 years of recurring revenue at 70 percent gross margins. They're very early. I don't want to quote a number because I can't remember how big it was, but over the over the next five decades, the amount of dollars that are going to go into energy storage is mind boggling. Companies need the technology to manage it. That's what Stem does. I think it's really compelling. There's risk, because it's still burning through cash because it has to get that SaaS recurring revenue to a larger scale to cover its base expenses. But once it gets to that critical mass, I think it's going to become a very cash flow positive business.