It's been a bumpy ride for various AI-related names in the market over the past few months, to say the least.
www.barchart.com Shares of formerly high-flying Fluence Energy (FLNC) have continued to be pummeled by investors, as market participants have clearly shifted their focus to finding companies with solid balance sheet and near-term earnings growth potential, over those with longer-duration upside.
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One could argue that Fluence Energy's status as a leading energy storage company should bode well, particularly as AI-driven demand for energy skyrockets. However, shares of FLNC stock dipped more than 17% during Thursday's trading session last week, as investors were pitched an outlook that simply didn't sound great.
Let's dive into what was announced, and why investors appear to be broadly souring on this name.
Why the Sour Face, Mr. Market?
Fluence Energy's projected 2026 full-year EBITDA loss of around $200 million was a shocker. Indeed, the company previously put forward an estimate that was roughly 20-times lower (around $10 million), signaling that capital expenditures are likely to remain high, with the company's profitability prospects dwindling.
Now, there were some one-time events that impacted Fluence's forward guidance. The company noted that its continued manufacturing ramp-up in Houston has gotten more expensive (tariffs and global uncertainty haven't improved the picture for companies in this space). Additionally, Fluence's management team has continued to harp on supply chain issues which have made it harder to secure inputs at a reasonable price, though demand remains robust.
www.barchart.com Given the fact that Fluence is still a very early-stage company in terms of both its revenue and earnings growth potential, multiples don't really matter at this stage in the game. Having gone public in the pandemic era, Fluence has seen plenty of volatility over time as the company's search for profitability continues.
At this point in the market cycle, I think the simple reality is that many investors are tiring of the narrative that certain companies will be profitable “one day.” Many are demanding results now, and given the extreme demand many energy-related stocks are seeing thanks to AI and other technological developments, I think many investors are simply looking elsewhere for upside in what could be an increasingly volatile market.
Any time investors hear about a company like Fluence restructuring operations and streamlining its manufacturing processes, there's going to be a knee-jerk reaction. I think this headline news is something investors should watch, and Fluence could be a “canary in the coal mine” of sorts for those looking for hints as to where high-growth energy stocks could be headed in the medium-term.
What Do Wall Street Experts Think?
Currently, the consensus price target for FLNC stock sits just a hair above of $11 per share, implying around 53% upside from current levels.
www.barchart.com Now, that's not to say there's broad disagreement among analysts covering this name. There is.
The low target for FLNC stock on the Street sits at $3 per share, with a high target of $23. That's about as wide a divergence as you'll see.
I think investors looking for growth at a reasonable price do have better options to consider in this market. That's not to say that at some point, every stock becomes attractive (well, almost). I just don't think Fluence Energy is there yet, and I'm leaning more toward the low target on Wall Street at this point in time.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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