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Artificial intelligence (AI) has dominated headlines over the recent years as companies race to harness its transformative power in every sector. Fueling this seismic AI scale-up are data centers primed to explode in the U.S. market. Projections indicate the booming expansion of U.S. data centers, driven by the insatiable demand for AI, is set to double the industry's size by 2030.

Amid this massive data center demand, Battery Energy Storage Systems (BESS) emerge as a vital solution to address rising energy costs and grid instability. By maximizing renewable energy utilization and ensuring continuous availability, BESS not only supports sustainability goals but also strengthens data centers' capacity to innovate and grow amidst increasing demands.

Given this promising outlook, battery storage stock Fluence Energy, Inc. (FLNC) stands out as a compelling investment opportunity. Recently awarded a fresh "Buy" rating by Truist Securities, Fluence boasts a potential upside of over 70% to its mean price target. Here’s a closer look.

About Fluence Energy Stock

Founded in 2018, Virginia-based Fluence Energy, Inc. (FLNC) is a powerhouse joint venture between Siemens and The AES Corporation. As a global leader in energy storage and cloud-based renewable software, Fluence operates in 47 markets worldwide. The company’s modular, scalable storage products, premier services, and AI-driven Fluence IQ Platform are driving the clean energy transition. Valued at $3.3 billion by market cap, Fluence is revolutionizing the energy landscape, creating resilient and sustainable electric grids for a brighter, greener future.

Shares of Fluence have tumbled 40.6% over the past 52 weeks, and are down 31.1% on a YTD basis, underperforming the broader S&P 500 Index ($SPX) over both time frames.

Considering the stock’s underwhelming price action over the past year, FLNC stock now trades at just 1.47 times sales, lower than its industry peers and in line with its own five-year average.

Fluence Energy Slides After Q2 Earnings

Following the company’s Q2 earnings results after the close on May 8, shares of Fluence dropped 8% in the subsequent trading session. The company’s total revenue of $623.1 million plunged 10.8% year over year, primarily due to the timing of product deliveries, but managed to exceed Wall Street’s projections.

Despite the revenue dip, the company showcased significant improvements on the profitability side. During the quarter, Fluence's GAAP gross profit margin soared to 10.3% from 4.4% last year, with an adjusted margin of 10.6%, highlighting its improved efficiency and focus on high-margin projects.

Moreover, the company reduced its loss per share to $0.07, marking a significant improvement from $0.21 in the year-ago quarter. Additionally, Fluence achieved a robust free cash flow of $87.8 million in the first half of fiscal 2024, a remarkable turnaround from a negative $164.5 million incurred in the same period last year.

Commenting on the company’s Q2 performance, CEO Julian Nebreda said, “We continued to demonstrate consistent profitability with our third consecutive quarter of double-digit gross margins. "

For fiscal 2024, management reaffirmed its guidance, forecasting total revenue to range between $2.7 billion and $3.3 billion, while adjusted EBITDA is expected to land between $50 million and $80 million. Plus, management believes that Fluence's $16 billion development pipeline is well-poised to yield compelling returns for shareholders in 2025 and beyond.

Analysts tracking Fluence Energy project the company to swing to a GAAP profit of $0.11 per share in fiscal 2024, compared to an annual loss in 2023. EPS is expected to jump 500% to $0.66 per share in fiscal 2025.

What Do Analysts Expect For Fluence Energy Stock?

On July 10, Fluence Energy received a "Buy" rating and a $25 price target from Truist Securities. Analyst Jordan Levy highlighted Fluence's “unmatched scale” and software capabilities, which are expected to create opportunities for upside potential in AI and data center deployments.

Furthermore, Fluence's vertically integrated battery energy storage platform and early procurement of U.S.-made battery cells provide the company with a significant “first mover advantage,” says Levy. The analyst also anticipates continued expansion in Fluence's market share in the BESS space and growth in recurring revenues, pointing to a potential upside in profit margins.

Overall, FLNC stock has a consensus “Moderate Buy” rating. Of the 25 analysts covering the stock, 17 recommend a “Strong Buy,” two suggest a “Moderate Buy,” five advise a “Hold,” and the remaining one gives a “Strong Sell” rating.

The average analyst price target of $28.85 indicates an impressive potential upside of 73.4% from the current price levels. The Street-high price target of $47, newly adjusted by Evercore in May, suggests that FLNC stock could rally as much as 182%.

On the date of publication, Anushka Mukherji 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.