Fluence Energy's stock surges after BofA abandons bearish stance on the pure-play ESS investor

By Tomi Kilgore

Energy-storage-system company Fluence has a line of sight to sustained profitability, BofA says

Shares of Fluence Energy Inc. charged higher Wednesday after BofA Securities turned neutral on the energy-storage-products and -services company, saying near-term opportunities now balance out longer-term risks. The change followed a bearish 15 months for BofA.

Analyst Julien Dumoulin-Smith raised his rating to neutral after being at underperform since February 2022. He raised his stock-price target by 86%, to $26 from $14.

Dumoulin-Smith said the company's report for its fiscal second quarter "supports visibility to a better-than-expected profitability ramp" through fiscal 2024, while recent guidance on domestic content "expands line of sight" in fiscal 2025 and 2026.

The stock (FLNC) climbed 4.4% in afternoon trading. Shares of the company, which has a market capitalization of $4.13 billion at current prices, have run up 19% since Fluence reported a narrower-than-expected loss, according to FactSet, as revenue jumped 104% to $698.2 million, well above expectations of $422.3 million.

The company also boosted its full-year revenue guidance range to $1.85 billion-$2 billion from $1.6 billion-$1.8 billion.

Dumoulin-Smith said Fluence was one of the few "U.S. public pure-plays" to invest in the fast-growing energy-storage-services (ESS) market.

But despite the company's upbeat results and outlook, Dumoulin-Smith said he remains neutral on the stock, because the company's high growth is already reflected in the premium valuation following the recent rally. He also sees some downside risks further down the road.

"We continue to see long-term margin risk as [Fluence's] competitive positioning remains a key question," Dumoulin-Smith wrote in a note to clients. "Moreover, while we credit [Fluence's] first-mover advantage sourcing U.S. cells and realizing volume upside as a result, we believe this will be competed away 2026+."

Fluence was formed by Germany-based technology giant Siemens AG and Virginia-based utility AES Corp. (AES) in 2018. It went public in October 2021 at an initial public offering price of $28. The stock hasn't closed above that IPO price since Jan. 6, 2022.

AES currently controls all 58.59 million outstanding Class B-1 shares, each of which entitles the holder to five votes. Siemens owns 58.59 million Class A shares, or 50.1% of the outstanding Class A shares, which entitle the holder to one vote per share.

Fluence's stock has soared 37.8% year to date, while the S&P 500 has gained 8.2%.

-Tomi Kilgore

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05-17-23 1514ET

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