US Supply Chains And Grid Upgrades Will Drive Global Decarbonization

AN
AnalystHighTarget
AnalystHighTarget
Not Invested
Consensus Narrative from 21 Analysts
Published
09 Jul 25
Updated
23 Jul 25
AnalystHighTarget's Fair Value
US$19.39
59.9% undervalued intrinsic discount
23 Jul
US$7.78
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1Y
-47.0%
7D
-17.1%

Author's Valuation

US$19.4

59.9% undervalued intrinsic discount

AnalystHighTarget Fair Value

Key Takeaways

  • Diverse U.S. supply chain and advanced Smartstack technology strongly position Fluence for margin expansion, market share gains, and outperformance as global storage demand accelerates.
  • Market undervalues rebound potential and profitability from renegotiated contracts, digital services, and international growth, suggesting upside to current expectations and valuations.
  • Ongoing policy, supply chain, and competitive pressures threaten Fluence's revenue stability, margin protection, and long-term project viability across key markets.

Catalysts

About Fluence Energy
    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.
What are the underlying business or industry changes driving this perspective?
  • Analysts broadly agree that Fluence's domestic content strategy provides a margin buffer against tariff volatility and enhances long-term revenue visibility, but this narrative understates how the company's diverse U.S. supply chain-already able to blend up to twelve gigawatt-hours of annual domestic content-positions it to capture disproportionate market share as U.S. and global decarbonization efforts sharply accelerate utility-scale storage demand, supporting elevated earnings and sustained margin expansion over multiple years.
  • Analyst consensus expects the Smartstack platform to drive moderate growth, but sustained customer feedback and rapid adoption suggest Smartstack's superior density, flexibility, and safety could materially expand Fluence's addressable market, accelerate backlog conversion, and enable premium pricing, providing a step-change in gross and net margin potential beyond current guidance.
  • Market sentiment is currently discounting the magnitude and speed at which earnings will rebound post-tariff uncertainty, yet the backlog risk is more limited than perceived, with almost all paused contracts expected to be quickly renegotiated at favorable terms when policy clarity returns, causing revenues to potentially surge above consensus estimates in fiscal 2026 and driving operating leverage.
  • The company's leading presence in high-growth international markets-where grid modernization and electrification trends are converging-will allow Fluence to outpace global peers, capturing outsized share of multi-billion-dollar tenders and supporting an acceleration in top-line growth not fully reflected in current valuations.
  • AI-driven digital services and energy management platform expansion are being undervalued, with the company already achieving $110 million in annual recurring revenue and on track for $145 million, meaning that as grid digitization accelerates, recurring, high-margin digital and service revenues could rapidly scale to become the dominant contributor to EBITDA and free cash flow, materially boosting long-term profitability.

Fluence Energy Earnings and Revenue Growth

Fluence Energy Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • This narrative explores a more optimistic perspective on Fluence Energy compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
  • The bullish analysts are assuming Fluence Energy's revenue will grow by 40.1% annually over the next 3 years.
  • The bullish analysts assume that profit margins will increase from -1.0% today to 3.0% in 3 years time.
  • The bullish analysts expect earnings to reach $192.9 million (and earnings per share of $1.2) by about July 2028, up from $-23.9 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 bullish analyst cohort, the company would need to trade at a PE ratio of 24.4x on those 2028 earnings, up from -55.9x today. This future PE is lower than the current PE for the US Electrical industry at 28.7x.
  • Analysts expect the number of shares outstanding to grow by 1.34% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 8.66%, as per the Simply Wall St company report.

Fluence Energy Future Earnings Per Share Growth

Fluence Energy Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Heightened and ongoing tariff and trade policy uncertainty, specifically regarding U.S.–China tariffs, has caused Fluence and its customers to pause execution and signing of new U.S. contracts, which has directly led to a $700 million reduction in near-term revenue expectations and could continue to depress revenue and earnings if clarity remains elusive or tariffs remain high.
  • The company relies heavily on Chinese battery cell supply, and disruptions or limitations in sourcing, combined with underdeveloped alternative international cell supply chains, exposes Fluence to supply shortages or cost inflation-both of which would threaten its ability to deliver backlog and protect gross margins over the long term.
  • Intense global competition, including from large Chinese players who may eventually circumvent tariffs through non-China supply or local capabilities, creates ongoing margin pressure and risks commoditization, constraining Fluence's ability to expand or sustain net margins over the medium and long term.
  • Delays or reductions in major infrastructure investment, driven by persistently higher interest rates and tighter credit availability, could lead to project postponements or cancellations in key grid-scale storage markets, which would negatively impact long-term demand, future revenues, and backlog conversion for Fluence.
  • Regulatory and policy uncertainty, such as potential changes to domestic content incentives or imposition of foreign entity ownership restrictions, could disrupt eligibility for key subsidies, undermine the economic attractiveness of Fluence's projects, and create unpredictable earnings and cash flows well into the future.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The assumed bullish price target for Fluence Energy is $19.39, which represents two standard deviations above the consensus price target of $8.61. 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 bullish end of the spectrum.
  • However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $2.0.
  • In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $6.4 billion, earnings will come to $192.9 million, and it would be trading on a PE ratio of 24.4x, assuming you use a discount rate of 8.7%.
  • Given the current share price of $10.21, the bullish analyst price target of $19.39 is 47.3% higher.
  • 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.

How well do narratives help inform your perspective?

Disclaimer

AnalystHighTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystHighTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystHighTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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