Global Financing Crunch And Supply Issues Will Weaken Outlook

Key Takeaways

• Intensifying global competition, supply chain risks, and emerging storage technologies threaten market share, pricing power, and long-term earnings stability.
  
• Production inefficiencies, regulatory changes, and supplier dependency create ongoing margin volatility and could restrain future revenue growth.
  
• Favorable policy, strong backlog, supply chain optimization, and rising demand for storage position Fluence for robust, resilient, and diversified long-term growth despite regulatory challenges.

Catalysts

Through its subsidiaries, provides energy storage and optimization software for renewables and storage applications in the Americas, the Asia Pacific, Europe, the Middle East, and Africa.

• The risk of tightening global financing conditions and higher interest rates could lead to deferred or canceled energy storage projects, curtailing order volumes and putting downward pressure on future revenue growth even as governments continue their decarbonization push.
  
• Persistent supply chain complexities, including potential disruptions from geopolitical tensions or protectionist trade barriers, can lead to higher component costs and production delays; these may erode gross margins and generate unforeseen expenses, affecting both near-term and long-term earnings stability.
  
• Emerging storage alternatives-such as hydrogen, mechanical, or long-duration storage-may scale faster than anticipated, stealing market share from lithium battery-based systems and capping Fluence's addressable market just as industry-wide adoption of distributed storage also threatens to undermine large, centralized grid storage demand and, with it, future revenue and margin potential.
  
• Prolonged and intensifying pricing competition across the global battery storage industry is likely to accelerate price reductions for grid-scale storage, forcing ongoing cuts to average selling prices and compressing gross margins, a trend potentially exacerbated by commoditization and rival utilities developing in-house storage capabilities.
  
• Ramp-up execution issues at new U.S. facilities and high dependency on select domestic suppliers could continue to cause production inefficiencies, revenue delays, and margin volatility, while regulatory changes such as FEOC and evolving battery material restrictions may increase compliance costs and further constrain earnings growth.

Fluence Energy Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Fluence Energy compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Fluence Energy's revenue will grow by 12.3% annually over the next 3 years.
• The bearish analysts are not forecasting that Fluence Energy will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Fluence Energy's profit margin will increase from -0.8% to the average US Electrical industry of 10.2% in 3 years.
• If Fluence Energy's profit margin were to converge on the industry average, you could expect earnings to reach $353.2 million (and earnings per share of $1.86) by about August 2028, up from $-18.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 2.0x on those 2028 earnings, up from -56.6x today. This future PE is lower than the current PE for the US Electrical industry at 32.4x.
• Analysts expect the number of shares outstanding to grow by 1.45% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.45%, as per the Simply Wall St company report.

Fluence Energy Future Earnings Per Share Growth

Risks

• Recent U.S. federal legislation, such as OB3, provides extended investment tax credits for stand-alone storage through 2034 and creates strong incentives for domestically produced energy storage systems, which enhances Fluence's competitive positioning and may drive increased revenue and margin resilience in the long term.
  
• The company's sizable $4.9 billion backlog, growing pipeline of $23.5 billion, and strong contract wins in diverse markets (including record contracts in Australia and signs of U.S. recovery) provide high forward revenue visibility and suggest robust earnings potential over the next several years.
  
• Ongoing cost and supply chain optimizations, ramp-up of domestic manufacturing, and the ability to pass tariff-related costs on to new customers are already supporting structurally higher gross profit margins, which could lead to sustained improvements in net margins and overall profitability.
  
• Secular demand drivers such as grid reliability needs, rapid data center buildout (with early engagement from Fluence in this market), and the rising competitiveness of batteries over gas turbines point to significant long-term market expansion, indicating the company is well-positioned to capture high-growth revenue streams.
  
• New regulatory and tariff regimes are causing some short-term disruptions, but Fluence has already restarted previously delayed contracts and is proactively working to ensure supply chain compliance, suggesting that regulatory clarity and first-mover advantage in domestic content could support consistent earnings and minimize revenue risks.

Valuation

• The assumed bearish price target for Fluence Energy is $2.9, which represents two standard deviations below the consensus price target of $7.63. This valuation is based on what can be assumed as the expectations of Fluence Energy's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.0, and the most bearish reporting a price target of just $2.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $3.5 billion, earnings will come to $353.2 million, and it would be trading on a PE ratio of 2.0x, assuming you use a discount rate of 9.4%.
  
• Given the current share price of $7.95, the bearish analyst price target of $2.9 is 174.3% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.