We recently compiled a list of the 10 Best Renewable Energy Penny Stocks to Invest In. In this article, we are going to take a look at where Stem, Inc. (NYSE:STEM) stands against the other renewable energy penny stocks.
On November 11, the Financial Times reported that the U.S. clean energy industry faces a significant setback following Donald Trump’s election victory. The article highlights that several developers have halted projects, and investors are selling shares due to uncertainties about policy direction and federal funding under the incoming Trump administration. According to Mike Carr, president of Solar Energy Manufacturers for America, approximately half a dozen clean energy projects are awaiting policy certainty before proceeding.
Trump’s election, combined with the prospect of a Republican-controlled Congress, has led to a sharp decline in renewable energy stocks. The iShares Global Clean Energy ETF dropped 7% after the election. Additionally, short sellers of renewable energy stocks reportedly profited over $1 billion in the aftermath.
Despite the turbulence, some industry leaders and analysts remain cautiously optimistic, suggesting that the economic case for renewable projects could persist under a Trump administration. They also believe that existing tax credits for power generation and manufacturing may remain intact. However, they warn that sectors such as offshore wind and electric vehicles may face significant challenges. Trump has pledged to repeal the Inflation Reduction Act, a major driver of U.S. clean energy investment, and vowed to expand oil and gas production while halting offshore wind projects and EV mandates.
Biden’s target to reduce emissions by 50-52% from 2005 levels by 2030 is at risk under a second Trump term. Such a shift could result in an additional 500 million tonnes of carbon emissions in the energy sector by the end of the decade.
US Renewable Energy Sector Continues to Grow, Despite Challenges
While uncertainties loom over the renewable energy sector, the industry continues to demonstrate resilience. According to a report by Rhodium Group, a New York-based research institute, the renewable energy and transportation investment in the United States has continued to break records, reaching a new high of $71 billion in the third quarter of 2024. This marks a 12% increase from the same period in 2023 and a nearly unbroken quarter-on-quarter growth trend over the past three years.
The report highlights that renewable investment accounted for 5% of total US private investment in structures, equipment, and durable consumer goods, up from 4.5% in the third quarter of 2023. Retail investment was a major driver of this growth, increasing by 9% relative to the previous quarter, largely due to a surge in zero-emission vehicle (ZEV) sales. However, investment in renewable technology manufacturing remained flat quarter-on-quarter, while investment in deploying technology to decarbonize energy and industrial production slipped 7% quarter-on-quarter.
The report also assessed the progress of the US renewable electricity transition and found that the current pace of capacity expansion is falling short of what is needed to deliver a 40% reduction in net GHG emissions below 2005 levels by 2030. The analysis of projects in the pipeline suggests that both solar and wind are underperforming, aligning more closely with a scenario that would yield only a 30% reduction by 2030.
Despite the challenges and uncertainties facing the renewable energy sector, the industry’s resilience and potential for growth remain evident. With that in context, let’s take a look at the 10 best renewable energy penny stocks to invest in.
Our Methodology
To compile our list of the 10 best renewable energy penny stocks to invest in, we used clean energy ETFs plus online rankings to compile an initial list of 25 renewable energy stocks trading below $5 as of November 22. From that list, we narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from the database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of their hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician in a lab coat standing in a cleanroom with energy storage systems in the background.
Stem, Inc. (NYSE:STEM)
Number of Hedge Fund Holders: 13
Stock Price as of November 22: $0.36
Stem (NYSE:STEM) is a leader in the renewable energy sector, specializing in AI-enabled software for energy storage and sustainable energy solutions. The company’s flagship software, Athena, optimizes battery storage and renewable energy operations for businesses and utilities.
Athena, widely regarded as a market leader, leverages AI to forecast energy needs, optimize storage usage, and enhance energy management efficiency for clients. Stem, Inc. (NYSE:STEM) has also expanded its software portfolio with PowerTrack, a performance management tool designed to streamline the monitoring of solar and energy storage assets.
On October 1, Stem, Inc. (NYSE:STEM) announced a new software and services-centric strategy that focuses on four key priorities. First, the company is shifting to a software and services-centric business model to generate predictable, high-margin recurring revenue. Second, the company is expanding its energy consulting services by leveraging its technical expertise and market experience to build stronger customer relationships and create more reliable revenue streams. Third, Stem, Inc. (NYSE:STEM) is enhancing its AI-enabled software and edge device capabilities. The company plans to integrate PowerTrack and Athena, into a unified solution that spans asset management and optimization for solar, storage, and other technologies. Finally, the company is revising its approach to hardware resales. Rather than focusing on hardware procurement, Stem, Inc. (NYSE:STEM) will offer advisory services and only procure hardware under profitability criteria that align with its broader software and services strategy. These initiatives aim to deliver additional value to Stem, Inc.’s (NYSE:STEM) 16,000 existing customers while opening new opportunities with both new and existing clients.
Overall STEM ranks 5th on our list of the best renewable energy penny stocks to invest in. While we acknowledge the potential of STEM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than STEM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.