Amid a modestly positive session on Wall Street, energy storage solution provider Fluence Energy (NASDAQ:FLNC) managed to soar above the clouds, initially gaining 15% before moving to 17% up in the late-afternoon hours. Earlier this week, Fluence announced the introduction of a new transmission asset. A Goldman Sachs analyst also upgraded FLNC stock, bolstering confidence in the enterprise and the underlying industry.
According to Fluence’s press release, the company launched Ultrastack, an “…advanced energy storage product designed to transform the way transmission and distribution networks operate worldwide by addressing some of the main challenges created by the energy transition.” These obstacles include weakening system stability, network infrastructure congestion and low visibility into distributed assets.
Fundamentally, Ultrastack’s introduction aligns with the broader push to revamp energy infrastructures. Per Bloomberg NEF, the news agency estimates that annual global investments into power grids will reach nearly $871 billion in the 2040s, up from $274 billion in 2022. Ultimately, it projects that the collective effort will hit $21.4 trillion by 2050.
Further, Fluence notes that battery-based energy storage facilitates economic savings via cost reduction associated with congestion management and the improvement of the integration of renewable energy into power grids. Additionally, these efficiencies may generate benefits for consumers downwind.
Goldman Sachs Sparks Confidence in FLNC Stock
Adding to the enthusiasm, Goldman Sachs analyst Brian Lee upgraded FLNC stock to “buy” from “neutral,” according to a CNBC report. Lee cited the recent pullback in the solar and broader energy sector as a potential buying opportunity. Earlier, the failures of major U.S. regional banks spooked investors as notable solar enterprises had their funds tied to embattled financial institutions.
“At the same time, we believe the recent pullback in stocks across our solar and energy storage sector on broad concerns over tightening credit availability and availability of financing has created attractive risk-reward,” wrote Lee in a research note. He also remarked that FLNC stock had declined about 35% since its peak.
Moving forward, Lee disclosed a $29 price target for shares of the energy storage specialist. Since the Wednesday close, the target implies a 78% upside potential.
On a fundamental note, Lee believes that the impact of legacy contracts will diminish. Looking ahead, Fluence should gain better pricing and cost controls over new contracts. Moreover, global economic stabilization should reduce raw material and logistics costs, which may lead to tangible benefits for FLNC stock.
Why It Matters
For all the talk about electric vehicles representing the future of transportation, the national grid requires holistic upgrades. As The Wall Street Journal points out, it’s not just about maximum power capacity but also the transmission of said power to individual homes and businesses.
Such enhancements will incur high costs, likely leading to higher electricity rates. Therefore, demand will likely rise for enterprises focusing on mitigating expenses, potentially boding well for FLNC stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
