10 Best Green Energy Penny Stocks to Buy Now

2. Stem (NYSE:STEM)

Number of Hedge Fund Holders: 16  

Market Capitalization as of September 4: $84.97 Million  

Stem (NYSE:STEM) is a leading player in the green energy sector and specializes in AI-enabled software for energy storage and green energy solutions. The company has positioned itself as a pioneer in managing energy resources with its software, Athena, which optimizes battery storage and green energy operations for businesses and utility companies. Stem (NYSE:STEM) has also expanded its suite of software products, introducing PowerTrack, a performance management tool aimed at streamlining the monitoring of solar and energy storage.

The company’s recurring revenues from its software make Stem (NYSE:STEM) a compelling investment opportunity in the green energy space. The company has consistently grown its Contracted Annual Recurring Revenue (CARR) from $52 million in Q1 2022 to $91 million by Q4 2023. Despite a slight setback in Q1 2024, the company is poised to continue expanding its software and services segment, which offers high-margin and long-term contracts. This shift will reduce revenue volatility, making the business more predictable and less reliant on hardware sales.

Stem’s (NYSE:STEM) flagship software, Athena, is widely regarded as an industry leader in energy storage optimization. Athena uses AI to forecast energy needs, optimize storage usage, and improve overall energy management efficiency for clients. Additionally, the launch of PowerTrack, a tool for monitoring solar and hybrid energy assets, is expected to expand the company’s customer base and generate further high-margin software revenue. These products enhance the company’s competitive edge and positions Stem (NYSE:STEM) to capitalize on the growing demand for advanced energy management solutions.

Stem (NYSE:STEM) has made significant strides towards profitability,  In Q1 2024, the company nearly broke even in operating cash flow and reduced its capital-intensive project backlog by canceling lower-margin contracts worth approximately $257 million. This allows Stem (NYSE:STEM) to focus on more profitable, high-margin opportunities. Management projects positive operating cash flow in 2024 for the first time in its history.

Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $2.31, which represents a 134% upside potential from its current level. As of the second quarter, the stock is held by 16 hedge funds and the stakes amount to $7.81 million. Ardsley Partners is the largest shareholder in the company with stocks worth $1.94 million as of June 30.