Electric vehicles. Renewable energy. Wind farms and solar arrays. These are the technologies that will ‘lead the way’ of the next century’s industrial trends. They exist today, of course, but just where they will go, and what they will look like in a century, are simply unknowable.
There are some things we do know. It is certain that today’s electrical and energy storage tech is going to evolve, changing its shape to adapt to the industrial-technological landscape that is growing up around us even now. Evercore analyst James West describes this as the next ‘Mega Theme,’ and dubs energy storage as the ‘third pillar’ of tomorrow’s power grids.
“The future of energy storage isn’t strictly about lithium-ion batteries although electrochemical technologies such as li-ion will continue to dominate and be deployed at ‘utility-scale.’ There is an arms race underway for vertical integration, digital applications, supply chain diversification, and data-intensive products to capture a growing customer base including utilities, independent power producers, commercial and industrial users, and renewable project developers,” West writes.
The analyst goes on to point out two energy storage stocks that are poised to gain as the new power economy develops. Using TipRanks’ database, we did a deep dive into the data to find out what makes both so attractive. Let’s take a closer look.
Eos Energy Enterprises (EOSE)
We’ll start with Eos Energy. This company is developing clean energy storage systems, based on safety, efficiency, scalability, and sustainability. Eos uses zinc hybrid cathode (Znyth) technology, to create battery systems that offer durability for up to 5,000 charge/discharge cycles – or 15 calendar years. The tech is one of the most efficient non-lithium solutions to energy storage, and is non-flammable – a major advantage over existing lithium ion systems.
Eos’ energy storage systems have applications in the utility industry, commercial & industrial facilities, and the renewable energy sector. Renewables, especially, can benefit from the battery systems, as both wind and solar power suffer from intermittency and require effective energy storage solutions.
This company has yet to develop a steady income stream, but in its most recent quarterly report, for 3Q21, Eos did give some interesting highlights. It reported $137.4 million in booked orders, and a total work backlog of $151.8 million as of November 10, 2021. This bodes will for future prospects as the company enters its production phases. So far, Eos has shipped out a total of $3.4 million in products.
Evercore’s James West notes the buildup of the work backlog, and the established viability of the technology, and goes on to say, “EOSE is a niche investment in the major energy storage theme. This is a revenue growth story through the medium-term as the company focuses on commercialization while a ramp in manufacturing capacity should provide meaningful revenue realization from 2023-2025... EOSE’s long-duration energy storage technology is competitively advantaged given its performance profile and lower exposure to lithium-ion supply chain risks.”
In line with these bullish comments, West initiated coverage on EOSE with an Outperform (i.e. Buy) rating along with a $21 price target. This figure conveys his confidence in EOSE's ability to soar 127% in the next twelve months. (To watch West’s track record, click here)
Most other analysts don’t beg to differ. 3 Buy ratings and a single Hold add up to a Strong Buy consensus rating. With shares priced at $9.25 and an average price target of $20.33, the stock has ~120% upside potential in the next 12 months. (See EOSE stock analysis on TipRanks)
Fluence Energy (FLNC)
The second company we’ll look at, Fluence Energy, uses a modular system to build configurable, scalable energy storage. The base unit is the Fluence Cube, a standardized ‘building block’ power storage system based on more than 13 years of experience in the energy storage niche. The Cube allows rapid delivery and deployment, for cost effective build-outs of battery systems. The design can be scaled from 1 megawatt up to 500 megawatts or more.
The Fluence Cube system is installed in conjunction with the company’s Fluence OS, an operations platform that provides comprehensive controls to manage the system, across single installations or larger grids. The Fluence IQ is added, an AI-enabled platform that speeds up the system’s decision process and asset performance for improved revenues.
To date, Fluence has deployed or contracted for more than 3 gigawatts of energy storage in 29 markets around the world. Earlier this month, the company signed a contract in Italy, with Enel-X, for the deployment of the Gridstack energy storage system. The installation, involving two systems, will total 40 megawatts capacity.
Fluence shares entered the public markets on October 28, in an IPO that raised about $998 million in gross proceeds. The shares started trading at $28, and saw 35.65 million shares hit the market.
Among the bulls is Evercore’s James West, who likes the fundamental of this newly public stock.
“We view FLNC as one of the ‘must-owns’ in the energy storage sector with market cap. The company is backed by industrial and utility market leadership via sponsorship from Siemens AG and AES Corp. and has grown quickly to become one of the top energy storage providers. Despite competitive threats and supply chain risk, we believe the best way to value FLNC is by focusing on the fundamentals for this premium growth company,” West opined.
To this end, West initiated coverage on FLNC with an Outperform (i.e. Buy) rating and $47 price target. This target suggests the stock will be changing hands for ~29% premium a year from now. (To watch West’s track record, click here)
Turning now to the rest of the Street, other analysts also like what they’re seeing. 8 Buy ratings and 3 Holds add up to a Moderate Buy consensus rating. Given the $45.20 average price target, the upside potential comes in at ~24%. (See FLNC stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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