Is Fluence Energy a Good Cleantech Stock to Own?

Fluence Energy, Inc. (FLNC) in Arlington, Va., is a leading energy storage products and services provider that operates internationally. It was established in January 2018 as a joint venture between Siemens AG (SIEGY) and AES Corporation (AES). 

The company was named the Best Commercial Technology of the Year in by S&P Global Platts Global Energy Awards last year for its sixth-generation Tech Stack.

FLNC went public through a traditional IPO process on September 28, 2021. The company listed 35.65 million shares of its Class A stock on the Nasdaq stock exchange, priced at $28 per share. FLNC raised $998.20 million in gross proceeds through this offering. and the stock opened at $35 on its first trading day, 25% higher than its IPO price. However, the stock has since declined 1.8% in price.

Here is what could shape FLNC’s performance in the near term:

Industry Tailwinds

Backed by two of the largest companies in the energy space, FLNC is well-positioned to capitalize on the ongoing clean energy drive. It has a combined 13 years of experience from its predecessor companies. And its unique product and services portfolio and global supply chain should bolster its growth trajectory over the long term because many companies are investing heavily to reduce their carbon footprints.

Qatar Investment Authority (QIA) invested $125 million in FLNC in December last year through a private placement transaction for a 12% ownership stake. A portion of these funds was used to finance FLNC’s acquisition of AI platform Advanced Microgrid Solutions, thereby expanding its presence in Australia.

Mixed Valuation Metrics

In terms of forward EV/Sales, FLNC is currently trading at 1.57x, which is 23% lower than the 2.04x industry average. Its 1.56 forward Price/Sales multiple is 5.7% lower than the 1.66 industry average.

However, the stock’s 9.14 forward Price/Book ratio is 203.6% lower than the 3.01 industry average. Its EV/EBITDA ratio is negative 11.12.

Consensus Rating and Price Target Reflect Potential Upside

Of 13 Wall Street analysts that rated FLNC, 10 rated it Buy while three rated it Hold. The 12-month median price target of $46.09 indicates a 36.9% potential upside. The price targets range from a low of $39.00 to a high of $52.00.

POWR Ratings Reflect Uncertainty

FLNC has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

FLNC has a C grade for Sentiment and Value. Analysts expect FLNC’s revenues to increase 81.6% in the current year and 43.9% next year. However, the company’s EPS is expected to remain negative until at least 2023, justifying the Sentiment grade. In addition, the stock’s mixed valuation metrics are in sync with the Value grade.

Of the 58 stocks in the F-rated Utilities – Domestic industry, FLNC is ranked #24.

In total, we rate FLCN on eight distinct levels. Beyond what we have stated above, we have rated FLNC for Growth, Stability, Quality, and Momentum. Get all FLNC ratings here.

Bottom Line

Amid the rising concerns surrounding climate change, some of the most powerful countries in the world have announced ambitious plans to reduce their carbon footprint in the coming decades. The Biden administration signed a landmark $1.2 trillion infrastructure bill with several provisions for sustainable energy, aligned with the aim of achieving carbon neutrality by 2050. FLNC’s unique energy storage products and related service offerings are expected to be highly demanded internationally in the near term. However, the company’s net income margin and ROA are negative. Thus, we think investors should wait until FLNC’s profit margins improve before investing in the stock.

How Does Fluence Energy, Inc. (FLNC) Stack Up Against its Peers?

While FLNC has a C rating in our proprietary rating system, one might want to consider looking at its industry peer, Brookfield Infrastructure Corp. (BIPC), which has a B (Buy) rating.

FLNC shares were trading at $34.06 per share on Wednesday morning, down $1.96 (-5.44%). Year-to-date, FLNC has declined -2.69%, versus a 29.24% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

More...