Stem Jumps 32% in a Month: Should You Add the Stock to Your Portfolio?

Stem’s STEM shares have jumped 32.1% over the past month, outperforming the broader Zacks Computer and Technology sector’s appreciation of 19.5% and the Zacks Computers - IT Services industry’s rise of 17.8%.

STEM's strong stock price performance can be largely attributed to its robust first-quarter 2025 results, as the company reached several key profitability milestones.

Stem delivered a strong top-line performance in the first quarter of 2025, with total revenues rising 27% year over year, driven by heightened focus on its software portfolio, particularly the PowerTrack platform. The top line beat the Zacks Consensus Estimates by 26%, highlighting the success of STEM’s strategy to shift toward a more software-centric business model. Stem incurred a loss of 15 cents per share, narrower than the Zacks Consensus Estimate of a loss of 20 cents.

The company reported a 46% enhancement in the gross margins, driven by strong growth across its high-margin software, services and edge device offerings. STEM also generated positive quarterly cash flow of $8.5 million from operations for the first time in its history — a key indicator of the company’s operational discipline and progress. These achievements underscore the effectiveness of STEM’s refined business model and its strategic execution.

Stem, Inc. Price and Consensus

 

Stem, Inc. price-consensus-chart | Stem, Inc. Quote

STEM shares have outperformed its industry peers, including Cerence CRNC, Accenture ACN and Roper Technologies ROP. Shares of Cerence, Accenture and Roper Technologies have gained 39.2%, 13.8%, and 4.9%, respectively, over the same time frame.

Stem’s Impressive Financial Performance

A key highlight of the first-quarter 2025 results was the continued expansion in STEM’s recurring revenue streams. Annual recurring revenue (ARR) reached $57 million, up 8% year over year, whereas contracted annual recurring revenue (CARR) grew 7% sequentially to $69 million. These metrics underscore the strength and scalability of STEM’s software and services portfolio, which is increasingly contributing to long-term revenue visibility and improved profitability.

Operational metrics showed meaningful improvement. Solar operating AUM reached 32.4 GW, representing a 20% year-over-year increase and an 8% sequential gain. Storage Operating AUM doubled to 1.6 GWh from the same period last year.

However, bookings in the reported quarter came in at $34.5 million, slightly below the $37.6 million reported in the year-ago quarter. STEM’s contracted backlog rose 21% sequentially to $25.3 million, reflecting solid underlying demand and a healthy project pipeline moving forward.

Organizational Transformation Drives Success for STEM

In alignment with its strategic evolution, Stem has executed a significant organizational transformation aimed at enhancing operational efficiency and driving sustained profitability. A key initiative has been the establishment of four distinct business units — Software Products, Professional Services, Managed Services and OEM Hardware — each with full profit and loss accountability. By giving each unit ownership over its financial outcomes, including EBITDA and cash flow, STEM is positioning itself to make faster, more informed decisions that are aligned with customer needs and market dynamics.

As part of this shift, STEM implemented a targeted 27% workforce reduction announced on April 9, 2025. The reduction is expected to result in approximately $30 million in annual cash cost savings, including an anticipated $24 million benefit in 2025. These changes underscore STEM’s commitment to operational discipline and long-term value creation, reinforcing its trajectory toward sustainable profitability.

Stem Reaffirms 2025 Outlook, Signals Profitability Path

STEM reiterated its 2025 guidance.

Revenues are projected between $125 million and $175 million. The Zacks Consensus Estimate for revenues is pegged at $145.20 million, indicating year-over-year growth of 0.43%.

The consensus mark for the 2025 bottom line is pegged at a loss of 51 cents per share. The estimate implies a significant improvement from a loss of $1.04 per share incurred in the prior year.

Conclusion: Buy STEM Stock Now

Stem’s solid first-quarter performance, growing Annual Recurring Revenue base and first-ever positive operating cash flow highlight its strategic momentum. Its shift to high-margin software, cost optimizations and a streamlined operating model positions the company for sustainable growth. A reaffirmed guidance reflects management’s confidence in long-term profitability and smooth execution.

STEM has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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