BUY STEM @ $23.68

Buying STEM @ $23.68

1% position

Adding another lottery ticket sort of company to my EVGo holdings. Via a long-term contact, I got in touch with Stem and learned a bit about them. It's a battery play for industrial customers and possibly grid-scale.

While the company sells hardware (batteries), the real secret sauce is their software.

Earnings are a bit tough so here's a quick rundown and example:

For a $100 sale, only $40 shows up as revenues in Year 1. The remaining "revenues" show up over 40 years despite Stem taking in $100 of cash. However, ALL of the costs show up in Year 1. Say the margin is 25% for illustration. This means, Stem shows a loss of $35 on this sale in the first year DESPITE bringing in $100 of cash.

Since STEM is a growth company, this accounting loss problem will continue. So the company won't be "profitable" for a long, long time.

But unlike many other similar stories of earnings losses, the economics are CASH positive today! If I understand the story correctly.

Either way, I'm positive on on the role of large batteries into the future and will jump in with a lotto ticket today.