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On Wednesday, UBS analysts downgraded Fluence Energy Inc. (NASDAQ:FLNC) stock from Buy to Neutral and significantly reduced the price target to $8.00 from the previous $28.00. The downgrade comes amid concerns about potential further profit reductions in fiscal year 2025. According to InvestingPro data, the stock has experienced a dramatic 68% decline over the past year, with shares currently trading near their 52-week low of $6.56. Fluence Energy, which has seen its adjusted EBITDA guidance for FY2025 cut by approximately 50% only three months after the initial forecast, faces challenges due to lower expected gross margins on recent contracts and delays in projects slated for FY2025.
UBS analysts pointed to the declining pricing power as a significant worry for the fundamental profitability of the integrator business model, despite a robust year-over-year storage growth of over 80% in the Americas for 2024. While Fluence Energy has reported six consecutive quarters with gross margins exceeding 10%, the firm now faces a difficult path to rebuild investor confidence. Recent InvestingPro data shows a current gross profit margin of 12.93%, with the company maintaining a healthy current ratio of 1.57, indicating sufficient liquidity to meet short-term obligations.
The analysts also highlighted the risks associated with global reliance on Chinese battery supply, adding to the uncertainties stemming from potential changes to U.S. renewable energy tax policies. These factors contribute to the apprehension surrounding Fluence Energy’s prospects. InvestingPro analysis reveals 18 additional key insights about Fluence Energy, including detailed financial health metrics and growth forecasts. Subscribers can access the comprehensive Pro Research Report, which provides deep-dive analysis of the company’s fundamentals and future prospects.
Despite these concerns, UBS’s Neutral rating reflects the current low valuation of Fluence Energy shares, which are trading at multi-year lows. This valuation comes even as the market demand continues to grow, and the company has updated its guidance for a positive adjusted EBITDA in FY2025. With a market capitalization of $1.27 billion and an EV/EBITDA ratio of 54.08, Fluence Energy is currently trading at approximately 10 times its estimated 2025 enterprise value to adjusted EBITDA and around 6 times its 2026 estimate.
The UBS analysts anticipate that investors will likely remain wary of the stock’s relative appeal due to the execution risks over the next year, despite Fluence Energy boasting a backlog exceeding $5 billion.
In other recent news, Fluence Energy Inc. has seen a string of downgrades and price target reductions from various analyst firms. RBC Capital Markets downgraded the company’s stock rating from Outperform to Sector Perform, decreasing the price target to $7. The downgrade is due to concerns about Fluence Energy’s growth and margin prospects, as well as uncertainties surrounding the market adoption of its next-generation battery technology.
Similarly, Wolfe Research cut Fluence Energy’s stock rating from Outperform to Peerperform, following the company’s revised revenue guidance for FY25. The revision is attributed to the delay of three significant contracts in Australia, which has led to lowered revenue expectations.
Roth/MKM analysts also downgraded Fluence Energy’s stock rating from Buy to Neutral, citing weak FQ1 results and a substantial reduction in the company’s forecast for FY’25 EBITDA. The analysts expressed concerns over the potential for ongoing gross margin compression due to competitive pressures, particularly in international markets.
Truist Securities analyst Jordan Levy revised the price target for Fluence Energy to $13, maintaining a Buy rating on the stock. Despite a downward revision, the analyst sees value in the company’s long-term potential due to the strong underlying growth dynamics in the Battery Energy Storage Systems (BESS) sector.
Lastly, Citi analyst Ryan Levine adjusted Fluence Energy’s price target downward to $10, maintaining a Neutral rating. The revision was prompted by weaker-than-anticipated financial results for the first quarter of fiscal year 2025, leading to a 15% cut in the company’s revenue guidance for FY25. These are recent developments that investors should consider.
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