STEM - Stem stumbles after BofA cuts to Sell equivalent as confidence 'strained'

2023-04-04 11:23:09 ET

Stem ( NYSE: STEM ) -7.3% in Monday's trading after Bank of America downgraded the stock to Underperform from Neutral with a $5 price target, cut from $9, seeing the company's latest convertible issuance "weighing on Street confidence given working capital considerations."

Stem ( STEM ) pitches itself as a software focused way to play energy storage, but "slow realization of revenues from this business means the company is ultimately dependent on lower margin hardware and service businesses to drive an EBITDA inflection," BofA's Julien Dumoulin-Smith wrote.

While company management suggests a rapid scale up in services would bridge the drop in hardware sales, "the pivot towards standing up a novel services business to hit contemplated guide accentuates the uncertainty from the latest capital raise," according to Dumoulin-Smith.

Stem ( STEM ) is trading near all-time lows despite rising revenues and margins, Great Plains Investment Research writes in an analysis published recently on Seeking Alpha .

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