Stem Drops 13% in a Month: Are the Shares Worth Buying on the Dip?

Stem’s STEM shares have lost 13% in the past month, underperforming the broader Zacks Computer and Technology sector’s 7.1% drop and the Zacks Computers - IT Services industry’s 9.8% decline.STEM shares have underperformed industry peers like Amdocs DOX, CDW Corp. CDW and Infosys INFY.Over the same timeframe, Amdocs shares have returned 2.2%, while CDW Corp. and Infosys have experienced declines of 5.5% and 10.5%, respectively.The underperformance can be attributed to the disappointing fourth-quarter financial results, with total revenues declining sharply 67% year over year due to lower battery hardware sales. This downturn impacted GAAP gross profit, leading to a $2.5 million loss. Additionally, backlog, CARR and Contracted Storage AUM declined sequentially, due to OEM hardware repricing and delayed project removal.Stem, Inc. Price and Consensus Stem, Inc. price-consensus-chart | Stem, Inc. QuoteWhile Stem's recent performance may seem discouraging, strategic initiatives, international expansion, strong customer and product base and a growing focus on software solutions position it for potential long-term growth in the clean energy sector.STEM’s Success Driven by PowerTrack SoftwarePowerTrack maintains a strong domestic market share, delivering high gross margins and unlocking expansion opportunities both in the United States and globally. As a core part of AI-driven energy solutions, it enables asset owners and operators to optimize storage, solar and hybrid portfolios, reinforcing long-term value creation.Stem remains optimistic about its strategic shift toward software and services, emphasizing the growing demand for AI-driven energy solutions. The increased adoption of PowerTrack among top commercial and industrial solar asset owners underscores the platform's market traction and potential for future growth.Domestically, PowerTrack continues to dominate, with 13 of the top 16 commercial and industrial solar asset owners in the United States standardizing on the platform. Additionally, Summit Ridge Energy has adopted PowerTrack across its 514 MW, 200-site solar fleet, further reinforcing its role as a premier energy management solution driving efficiency and profitability.Driving its international growth, a major Hungarian asset owner has selected PowerTrack to manage a 484 MW solar portfolio, marking a significant expansion in the EMEA region. This milestone highlights the platform’s scalability and market appeal, positioning it as a leader in global energy management.Strategic Cost Cuts to Boost Stem’s Financial HealthAs a part of its strategic initiatives, STEM is intensifying its focus on cost optimization to enhance profitability and operational efficiency. Building upon the 15% reduction achieved in the previous quarter, the company now targets additional cost savings of more than 20% in 2025. This aggressive push toward efficiency underscores Stem’s commitment to financial discipline as it navigates a competitive clean energy landscape.The company’s cost-saving measures include eliminating operational inefficiencies, streamlining its corporate structure and empowering management teams with greater control over decision-making. These efforts are expected to enhance adjusted EBITDA, improve cash flow and position Stem for sustainable growth.STEM’s 2025 Outlook Looks PromisingRevenues are projected between $125 million and $175 million. The Zacks Consensus Estimate for revenues is pegged at $146.40 million, indicating year-over-year growth of 1.26%.The consensus mark for the 2025 bottom line is currently pegged at a loss of 58 cents per share. The estimate implies a significant improvement from the year-ago quarter's loss of $1.04 per share, indicating that Stem’s cost-saving measures and strategic shift toward high-margin software and services may be yielding satisfactory results.Zacks RankStem currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Noble Gas Inc. (INFY): Free Stock Analysis Report Amdocs Limited (DOX): Free Stock Analysis Report Stem, Inc. (STEM): Free Stock Analysis Report CDW Corporation (CDW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks