Expect tax credits from the Inflation Reduction Act to boost this little-known battery storage stock by more than 60% in the months ahead, UBS said. Analyst Jon Windham initiated coverage of Stem with a buy rating and $19 price target in a note to clients Tuesday, suggesting a 64% rally for the stock from Monday’s close. “STEM is the market leader in the rapidly growing commercial storage market,” he said, noting that he expects order flow to ramp up in the first half of 2023. “STEM’s high operating leverage business model is positioned to be a key beneficiary of the 30% stand-alone storage tax credit in the Inflation Reduction (IRA), in our view.” Across the commercial battery storage sector, UBS anticipates a 34% compounded annual growth rate through 2030 driven by lower storage costs stemming from IRA tax credits and the consumer drive to trim energy expenses. While Stem has yet to post a quarterly operating profit, Windham expects the tides to shift. “We expect STEM to turn EBITDA positive in 2H2023 driven by strong incremental services profit margins and continued stable hardware margins,” he said. “In our view, STEM operates a high operating leverage business model and we anticipate that strong IRA-driven revenue growth will drive increased profitability.” Windham also upgraded shares of Altus Power, a solar power company poised to rally nearly 53% and improve capacity and earnings growth thanks to rising demand from the IRA. He highlighted in a separate note to clients Altus Power ‘s strategic partnerships with both CBRE and Blackstone , which should offer low-cost access to both customers and capital. “We view Altus Power as a key long-term beneficiary of the IRA and more normalized solar supply chains in 2023 — CNBC’s Michael Bloom contributed reporting
