Shares of energy storage company Stem (NYSE:STEM) jumped as much as 12.2% on Monday as renewable energy stocks quickly came back into favor. Shares ended the session with gains of 10.6%.
Barron’s recently published a bullish article on Stem and that seems to have gotten traders interested in the stock. The article touts the Biden administration’s goal of 100% carbon-free electricity generation by 2035, which would require a large amount of energy storage to be possible.
It doesn’t hurt that renewable energy stocks in general have spiked today. The price of oil is up 5.3% as I’m writing, which can often lead to gains in renewable energy stocks. And the market overall is rising higher and typically volatile stocks like Stem often exaggerate the market’s move. Add it up, and you have a big gain for this energy storage company.
Tailwinds may be behind energy storage overall, but investors should also look at Stem’s financials before getting too excited. The company is burning cash and is actually losing money on the software it sells, which should be a high-margin business. There are too many red flags in Stem’s operations for me to think today’s pop will last long. If the macro tailwinds turn into a growing profit, I’ll change my tune, but right now this is a stock I’m staying out of.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
View more information: https://www.fool.com/investing/2021/08/23/why-stem-stock-jumped-106-today/