When it comes to looking for the best stocks to buy for the next 10 years, AI-powered energy storage solution provider Stem — who is going public through a merger with Star Peak Energy Transition Corp. (NYSE:STPK) — should be at the top of your list. Why? Because buying STPK stock could be like buying Tesla (NASDQ:TSLA) stock five years ago.
It’s hard to make the argument that Tesla has not been among the best investments over the past five years.
In early 2016, Tesla’s stock price hovered around $30. Since then, it has soared more than 2,500% to nearly $900 at its most recent high point.
Tesla’s stock has risen so much that it has turned a group of early investors into millionaires. These “lucky” investors have their own moniker — “Teslanaires.”
Over the next five years, those “lucky” enough to buy into Stem’s stock early could follow in the footsteps of TSLA stock. By 2025, we could be talking about “Stemanaires.”
Today, Stem is in the early stages of flipping the global multi-trillion-dollar energy industry on its head. As the company does exactly that throughout the 2020s, STPK stock will roar higher, much as Elon Musk & Co. did five years ago.
The Key to Tesla’s Success
To understand the bull thesis on STPK stock, we need to first answer a very important question: Why is Tesla – a car company – worth more than $800 billion?
To answer, we turn to Chamath Palihapitiya, who put it best:
“The reality is that Tesla is a distributed energy business. They are figuring out how to harness energy, how to store it, and then how to use in a way to allow humans to be productive. Cars are a manifestation. But solar panels are as well. Power walls are as well… the big disruption that’s coming is to power utilities. There are trillions of dollars of bonds, of capex, of value sitting inside the energy generation infrastructure of the world that is going to go upside down.”
Chamath should know, as he was an early Facebook executive who became a super successful venture capitalist. And he’s 100% correct in joining the bullish chorus. Tesla is not just a car company. It’s an energy company.
The energy infrastructure as we know it — the one controlled by utility companies — will be dismantled and reassembled in the 2020s.
What takes its place will be a more democratized, decentralized version. An electric grid integrated with solar, wind, hydrogen, power walls and much more, all plugged into the existing grid. This will transform homes and offices into their own “energy generation hubs,” capable of producing always-on and yet cost-effective clean energy.
At the center of it all, is Tesla.
Tesla’s attractive positioning within this multi-trillion-dollar Distributed Energy Revolution is largely why TSLA has taken off like a rocket. But Elon Musk won’t be alone … Stem will also share the spotlight within this energy revolution. And at this very moment, Stem’s potential at the epicenter of the Distributed Energy Revolution is severely undervalued.
Stem Is the Early Leader in Energy Storage
Energy storage is key to the the Distributed Energy Revolution.
Currently, the world’s major sources of clean energy are intermittent. But if you could store the power from solar panels or wind energy in batteries, it would completely change the energy paradigm.
Tesla has exposure to this paradigm-shifting revolution with its Powerwall, but it’s not the leader. The leader is Stem.
Stem’s primary business is in the creation, selling and installation of an energy storage solution powered by artificial intelligence (AI). It’s solutions are paired with solar-power generation systems, and is powered by Athena.
Athena is the AI brain behind Stem’s storage solutions. Athena is able to respond in real-time to complex shifts in energy demand, which allow the AI to better optimize system performance. It leverages granular on-site energy usage and production data to forecast and learn energy patterns for each particular battery and for each particular customer.
By doing this, Athena can programmatically switch between battery power, onsite generation and grid power. It all depends on which the AI deems most cost-effective at that time.
This results in a 10% to 30% decrease in monthly electricity costs for its clients, and it’s the reason why Stem is a leader in this market.
In 2019, Stem installed 3X the energy storage capacity of its largest competitor in California, the largest energy storage market in the U.S. Even further, in California, Stem commands 75% share of the energy storage market. But this is more than a California story. Globally, Stem has commissioned more energy storage capacity than anyone else since 2014.
Stem has led the energy storage market for a while now, which is a very bullish argument for buying STPK stock now.
Athena AI Creates Sustainable Moat
More important than the fact that Stem is the leader in smart energy storage systems today, the company won’t cede its leadership position in this booming market anytime soon.
That’s because of data.
Stem’s edge in energy storage is thanks to Athena. Athena is what makes Stem’s systems smarts, and helps clients rack up bigger energy savings than what they would see with other not-as-smart energy storage systems.
What’s the key to Athena’s smartness?
Data. Athena is powered by data. Energy usage data. Production data. Grid data. There’s a lot of energy data out there. Athena uses all of it to optimize energy efficiency and reduce energy costs.
The more data Stem has to pump into Athena, the smarter the AI gets, and the more money it saves clients.
This is important, because Athena operates on a shared-data network among all Stem storage solutions – so each new battery Stem installs results in more data for the Athena “brain”.
It’s the AI world’s version of network effects.
To that end, Athena is only going to get smarter, and smarter, and smarter as Stem installs more, and more, and more energy storage solutions – which ultimately means that Stem should actually only extend its leadership position over the next several years.
Of course, that’s enormously bullish for STPK stock.
Huge Upside for STPK Stock
Stem’s ability to sustain leadership in the energy storage market is a big deal, because the global energy storage market is going to grow like wildfire over the next decade.
As every home, office, college campus, and retail center pivots to clean energy power, all those locations will need to be equipped with clean energy storage solutions. That’s why the global energy storage market is expected to increase 25X by 2030 and will represent a $1.2 trillion opportunity by 2050.
Stem is the unrivaled leader in that market, with clear visibility and sufficient firepower to sustain market dominance for a lot longer.
And yet… Stem is worth less than $5 billion today.
Could this one day be a $100+ billion company like Tesla? Maybe even a multi-hundred-billion company?
Consider its the leader of a market that will one day be worth $1.2 trillion, the answer is: Absolutely.
And that’s why I see STPK stock as the one of the best stocks to buy and hold for the next 10 years.
The Timing Is Perfect
In the markets, timing is everything.
And the timing has never been better to buy STPK stock than right now. Why? Texas.
Millions of people across Texas have had to go without power and water in below-freezing temperatures over the past week, as unusually cold weather has laid waste to the state’s electric grid. It’s an awful situation. And it’s not isolated.
We only have to go back a few months to late summer 2020 to see the last time this happened. That’s when millions of folks in California lost power because of a heat wave across that state. Too hot. Too cold. Today’s energy grid is like Goldilocks — the situation has to be just right, or it won’t work.
Unfortunately, climate change means that “just right” is becoming abnormal. Too hot and too cold will become more and more frequent going forward. This change in prevailing temperature conditions requires a change in our energy grid … else, blackouts will become commonplace. What’s the fix? Stem’s energy storage solutions.
Imagine if every home, apartment building, office, restaurant, and retail center in Texas had a Stem energy storage pack. Athena would’ve smartly stored up ample energy for all of those locations over the past few months, and then deployed all that stored energy to each individual unit during this power outage. No one today would be without power or water.
Every crisis eventually turns into an opportunity. This crisis is Stem’s opportunity to show the world that Athena isn’t just a “nice-to-have” — but a “must-have” in modern energy grids.
I fully expect this power crisis to kickstart a decade of hypergrowth ahead for STPK stock.
Bottom Line on Stem Stock
Stem could be the next Tesla. That is reason enough to warrant taking a position in STPK stock today, and holding onto that long position through the volatility over the next several years.
— Luke Lango
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Source: Investor Place