Stem (STEM): Assessing Valuation Following Q3 Earnings Beat and Upgraded 2025 Forecast

Stem (STEM) just released its third quarter earnings, showing a sizable jump in revenue along with a dramatic narrowing of net losses compared to the same period last year. Investors are also closely eyeing the company’s updated revenue forecast for 2025.

See our latest analysis for Stem.

Following the upbeat quarterly results and newly adjusted revenue guidance, Stem’s stock has seen its share price surge 15.76% in a single day, partially offsetting recent volatility. Despite short-term dips, the 1-year total shareholder return stands out at 145.43%, which suggests momentum may be shifting as investors reconsider long-term potential and risk.

If Stem’s turnaround has you looking for what else could be on the move, consider broadening your search and discover fast growing stocks with high insider ownership

With the recent earnings beat and an improved outlook for the year ahead, is Stem trading at an undervalued price? Or has the market already incorporated these positive developments into the stock’s current valuation?

Most Popular Narrative: 17.7% Overvalued

With a fair value estimated at $16.67 and Stem closing at $19.61, the most widely followed narrative suggests the market may be pricing in more upside than fundamentals support. The narrative provides a detailed view into what is driving analysts' calculations. Here is a key excerpt that illustrates the primary force behind their valuation:

The company's increased focus on the software and AI-enabled platform (for example, PowerTrack EMS and PowerTrack Sage), along with international expansion, is presented as opening new high-growth markets. However, sustained higher-for-longer interest rates could restrict access to affordable capital, raising financing costs for both Stem and its customers, and potentially dampening future earnings and topline growth.

Read the complete narrative.

Curious about the bold shifts in revenue and margin expectations that led to this eye-catching fair value? The full narrative reveals the intricate balance between aggressive software expansion and the hurdles that could reshape Stem's profit prospects. Ready to see which financial assumptions tip the scales the most? Dive deeper for all the surprising details hidden in the forecast.

Result: Fair Value of $16.67 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, accelerating software revenue growth and stronger cost controls could quickly shift the outlook. This could boost profitability and challenge current overvaluation concerns.

Find out about the key risks to this Stem narrative.

Another View: Market Multiples Tell a Different Story

While the fair value estimate suggests the stock may be overvalued, looking at price-to-earnings ratios offers a compellingly different perspective. Stem trades at 1.6x earnings, which is significantly below the US industry average of 31.8x and the peer average of 22.5x. The fair ratio the market could move toward is 6.4x, highlighting possible upside if sentiment changes. Could this gap point to an overlooked opportunity or lingering risks?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Stem Narrative

If you think there’s more to the story, or want to draw your own conclusions, you can build a custom narrative for Stem in just a few minutes, starting now: Do it your way

A great starting point for your Stem research is our analysis highlighting 4 key rewards and 5 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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