RBC cuts Fluence Energy stock rating to Sector Perform, PT to $7

On Wednesday, RBC Capital Markets revised its stance on Fluence Energy Inc. (NASDAQ:FLNC), downgrading the stock from Outperform to Sector Perform and significantly reducing the price target to $7.00, a steep decline from the previous target of $25.00. The adjustment by RBC Capital’s analyst comes amid concerns about the company’s growth and margin prospects. The downgrade follows a challenging period for the stock, which has declined over 41% in the past week alone and is currently trading near its 52-week low of $6.56. According to InvestingPro analysis, the stock’s RSI indicates oversold conditions, suggesting potential for a technical rebound.

The analyst at RBC Capital expressed that Fluence Energy is currently facing challenges that place it in a “penalty box”, suggesting that the burden of proof is on the company’s management to demonstrate improved growth and margins. This process is expected to potentially span several quarters, during which the stock is anticipated to remain relatively stable in the near term.

The report highlighted that the anticipated margin recovery for Fluence Energy is contingent on the market adoption of its next-generation battery technology, which is launching this week. However, due to the limited visibility into the sales timeline and the rate at which this new product will be attached to sales, RBC Capital prefers a cautious approach, opting to observe for tangible proof points before reassessing the company’s performance. While the company holds more cash than debt on its balance sheet and maintains strong liquidity with a current ratio of 1.57, InvestingPro’s Fair Value analysis suggests the stock may be undervalued at current levels.

The reduced price target of $7.00 is based on an 8x multiple of Fluence Energy’s forecasted FY26 EBITDA, as per the analyst’s statement. This new valuation reflects the uncertainties surrounding the company’s ability to execute on its growth strategy and successfully commercialize its next-gen battery product.

RBC Capital has also tagged Fluence Energy with a Speculative Risk qualifier, indicating that there may be higher potential risk associated with the company’s stock. This designation often suggests that investors should be aware of the possibility for more significant price volatility and the need for careful consideration before making investment decisions.

In other recent news, Fluence Energy Inc. faced several downgrades and adjustments in stock ratings and price targets from different analyst firms. Wolfe Research downgraded Fluence Energy’s stock from Outperform to Peerperform following the company’s revised revenue guidance for FY25. This downgrade was due to a delay in three significant contracts in Australia and increasing competitive pressures.

Simultaneously, Roth/MKM analysts also downgraded the company’s stock from Buy to Neutral, citing weak FQ1 results and a 53% reduction in FY’25 EBITDA. They expressed concerns over potential ongoing gross margin compression due to competitive pressures, particularly in international markets.

In contrast, Truist Securities maintained a Buy rating on the stock but cut the price target to $13 from $28. The analyst at Truist Securities believes that the stock’s valuation will eventually reconcile with the fundamental growth prospects of the Battery Energy Storage Systems (BESS) market.

Citi also adjusted Fluence Energy’s price target downward to $10 from $24, maintaining a Neutral rating on the stock. The adjustment was due to weaker-than-anticipated financial results for F1Q25 and a 15% cut in the company’s revenue guidance for FY25.

Despite the concerns, Barclays (LON:BARC) reiterated its Overweight rating on Fluence Energy with a steady price target of $22. The firm acknowledged potential stock weakness but maintained its positive rating. These are recent developments that reflect the various perspectives of different analyst firms on Fluence Energy’s financial performance.

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