On Friday, BMO Capital Markets adjusted their financial outlook on Stem Inc. (NYSE:STEM), a smart energy storage company, by reducing the stock's price target to $1.85, down from the previous target of $2.50. The firm maintained its Market Perform rating on the company's shares.
The adjustment followed Stem Inc.'s announcement of significant one-time adjustments, including a $33 million revenue reduction related to hardware contract guarantees, which led to a shortfall in top-line results. The reported revenue of $25.5 million fell short of the market consensus of $63 million and BMO Capital's expectation of $55 million. Additionally, the company's backlog experienced a substantial decrease of $289 million sequentially, primarily due to project cancellations and amendments totaling $257 million. First-quarter bookings were notably light at $24 million, compared to the full-year guidance of $1,500 million to $2,000 million.
Despite these challenges, Stem Inc. presented a positive aspect in its financial performance. The company's cash flow from operations in the first quarter was nearly breakeven. Furthermore, the firm reaffirmed its guidance for adjusted gross margin and adjusted EBITDA, indicating some stability in its operational efficiency.
The revised price target reflects the market's reaction to the mix of setbacks and steady operational metrics. BMO Capital's stance on the stock remains unchanged at Market Perform, suggesting that while the company faces headwinds, there are also elements of its performance that maintain investor confidence. The new price target of $1.85 represents BMO Capital's current valuation of Stem Inc. based on the latest financial data and market conditions.
InvestingPro Insights
In light of BMO Capital Markets' recent adjustments to Stem Inc.'s financial outlook, it is important to consider additional metrics and insights. According to InvestingPro, Stem Inc. operates with a significant debt burden, which may pose challenges in making interest payments (InvestingPro Tips 0 and 1). This is particularly relevant given the company's recent financial adjustments and revenue reduction. Furthermore, analysts do not anticipate the company will be profitable this year (InvestingPro Tip 7), which aligns with the setbacks reported in the company's financial results.
Real-time data from InvestingPro shows that Stem Inc. has a market capitalization of $308.52M USD and a negative P/E ratio of -1.78, reflecting market skepticism about future earnings (InvestingPro Data). The company's revenue growth over the last twelve months was 7.78%, yet the quarterly revenue growth experienced a significant decline of -62.21%. Additionally, Stem Inc.'s stock has been subject to high price volatility, with a 52-week price percentage of 24.47% of the high, and a price drop of over 50% year-to-date (InvestingPro Data).
Investors interested in a deeper analysis can find additional InvestingPro Tips on Stem Inc. at https://www.investing.com/pro/STEM, and can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 5 more tips available that could provide further insights into Stem Inc.'s financial health and stock performance.
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