What happened
Energy solutions specialist Stem (STEM 0.64%) deeply underperformed the market on Friday, falling by 18% as of 1 p.m. ET, compared to a 0.9% decline in the S&P 500. That decline pushed the volatile artificial intelligence stock back into negative territory for the year.
It came as investors digested Stem's fourth-quarter earnings report and its near-term guidance.
So what
Stem published its Q4 results before the market opened Friday. Sales rose to $156 million as its top-line growth accelerated to 194% year over year. Sales for the full year landed at $363 million -- squarely within the updated annual guidance range of $350 million to $425 million that executives had provided in early November.
NYSE: STEM
Key Data Points
Stem remained unprofitable, though, with net losses holding steady at roughly $35 million. Yet executives were thrilled with the company's broader performance, which included strong booking trends through late 2022. "Our commercial success continued in the fourth quarter," CEO John Carrington said in a press release.
Now what
Investors instead chose to focus on the fact that sales growth in Q4 was near the low end of management's forecast range. The company also issued a relatively modest outlook for the 2023 year, predicting sales of between $550 million and $650 million. Most Wall Street pros had been looking for revenue to reach about $660 million, and the stock fell as investors' expectations shifted.
Hitting the middle of management's forecast range would still mean Stem is growing at a 65% rate. Yet investors were hoping for faster sales gains as spending on energy-saving solutions remained elevated.
The good news is that Stem's order backlog is large and growing, which suggests that no sharp downturn is on the way for the business. But investors will still have to adjust to the company's slowing sales growth trends.
