Is the Growth Potential for Stem Stock Worth an Investment?

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In this Motley Fool Live segment from “3-Minute Stock Updates,” recorded on July 18, Fool.com contributor Connor Allen takes a closer look at what’s ahead for Stem (STEM 5.99%).

Connor Allen: They’re in a pretty good financial spot where they burned $30 million worth of cash in this past quarter. If you look at that at a run rate throughout the rest of the year, they’ve got approximately 3-4 years left with their current cash position before they might have to raise more cash. It’s not a great place to be in because you want a lot of that cash to be used for growth. You don’t want to just fund continued operations. You want to put that to make your business grow even further than it already is.

I expect within the next 3-4 years that the markets are going to level out and the valuation of Stem potentially could grow, and also the business is going to grow as well. I assume that this business is going to be able to do some secondary offerings in the next few years, not down 80 percent from their highs, maybe down 30 or 40 percent from their highs, where it actually would make sense to raise some cash. Not in a dire situation by any means. With the growth potential of this company, I wonder why I don’t own a small position here.

Connor Allen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Stem, Inc. The Motley Fool has a disclosure policy.