Electrification Trends Will Expand Industrial Lithium Battery Markets

Key Takeaways

• Accelerated domestic manufacturing, supply chain localization, and software breakthroughs could significantly enhance margins, profitability, and drive a major shift in revenue mix.
  
• Strong regulatory and customer demand, plus expansion into advanced battery segments, positions Flux Power for rapid market share gains and multi-year revenue growth.
  
• Heavy reliance on key customers, supply chain exposure, tight liquidity, and technology shifts jeopardize growth, profitability, and long-term competitiveness amid global battery market changes.

Catalysts

Through its subsidiary, designs, develops, manufactures, and sells lithium-ion energy storage solutions in North America.

• Analyst consensus expects modest margin expansion from operational efficiencies and cost reduction, but this likely understates the full impact-as Flux Power's accelerated domestic manufacturing and supply chain localization could deliver margin gains beyond 40 percent, sharply boosting future net earnings and profitability.
  
• Analysts broadly agree that recurring software revenue via the SkyBMS platform can enhance top-line growth, yet given patent protection and planned 100 percent cloud connectivity of shipped batteries, SkyBMS could quickly become a dominant, high-margin solution, driving transformational change in revenue mix and rapid scaling of EBITDA.
  
• As regulatory mandates and customer ESG commitments intensify, large enterprise customers in airport ground support and logistics are locked into multi-year electrification programs, supporting robust, multi-year revenue visibility and accelerating share gains for Flux Power as lead-acid battery alternatives retreat under tariff pressure.
  
• Flux Power's rapid expansion into higher voltage and next-generation battery chemistries positions the company to capture outsized share in emerging electrified market segments beyond forklifts-including ports, logistics automation, and future electric fleet categories-fueling accelerating unit sales and expanding the company's total addressable market.
  
• Recent competitive disruptions from tariffs have already resulted in Flux Power capturing additional orders and market share from less agile rivals, setting up a potential step-change in revenue growth and improved pricing power as near-term turmoil cements Flux Power as a preferred supply partner.

Flux Power Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Flux Power Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Flux Power Holdings's revenue will grow by 24.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -12.3% today to 9.0% in 3 years time.
• The bullish analysts expect earnings to reach $10.8 million (and earnings per share of $0.55) by about September 2028, up from $-7.7 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 16.8x on those 2028 earnings, up from -3.4x today. This future PE is lower than the current PE for the US Electrical industry at 33.7x.
• Analysts expect the number of shares outstanding to grow by 0.82% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.2%, as per the Simply Wall St company report.

Flux Power Holdings Future Earnings Per Share Growth

Risks

• Flux Power faces ongoing risks from the increasing globalization of battery manufacturing, where dominance by low-cost Asian producers could erode both its market share and ability to maintain favorable gross margins, ultimately impacting long-term revenue growth and profitability.
  
• Persistent exposure to tariff changes and supply chain disruptions, particularly due to reliance on China-based components and materials, poses threats to margin stability as cost inflation or new trade barriers could erode net margins and undermine earnings over time.
  
• The company's heavy dependence on key customers in specific verticals, such as airport ground support equipment and material handling, means any loss or reduction of orders from these large clients could lead to significant revenue volatility and threaten overall earnings stability in the long run.
  
• A tight cash position, with just half a million dollars on hand and substantial reliance on credit lines, could limit Flux Power's ability to fund research and development or manufacturing scale-up, thus constraining revenue growth and diminishing future earnings power if additional capital proves hard to access.
  
• Ongoing technological shifts and rapid advancements-potentially favoring new battery chemistries or integrated solutions-threaten to render current lithium-ion offerings or the new SkyBMS platform less competitive, risking loss of market share and inventory writedowns that could materially harm both revenue and net profit.

Valuation

• The assumed bullish price target for Flux Power Holdings is $8.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Flux Power Holdings'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 $8.0, and the most bearish reporting a price target of just $4.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $120.3 million, earnings will come to $10.8 million, and it would be trading on a PE ratio of 16.8x, assuming you use a discount rate of 10.2%.
• Given the current share price of $1.56, the bullish analyst price target of $8.0 is 80.5% 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.