On Thursday, BMO Capital adjusted its financial outlook for Stem Inc. (NYSE:STEM), reducing the stock's price target to $3.25 from the previous $4.00, while maintaining a Market Perform rating on the shares. The adjustment follows the company's year-end 2023 earnings call, which the firm noted had a recurring theme and rhythm.
During the call, Stem Inc. reported progress towards key financial milestones, including a move towards positive EBITDA. However, this was overshadowed by the inclusion of another one-time add-back. Despite this, management reaffirmed their position that there would be no need to raise equity, although the year-end cash balance fell short of their prior target.
The company also laid out its strategy for boosting software and service revenue. This comes in the wake of a year-over-year decline in storage-related software and service revenue for the fourth quarter. For fiscal year 2024, the guidance provided by Stem Inc. was noted to be lighter on the top line but consistent with expectations for gross margin percentages and EBITDA.
The firm's decision to maintain the Market Perform rating indicates a neutral outlook on the stock, suggesting that they do not see significant upside or downside potential from the current market price. The new price target of $3.25 reflects a more cautious view of the company's valuation in light of the recent financial disclosures and forward-looking statements made by the management during the earnings call.
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