Fluence Energy stock drops on Jefferies downgrade to ’Underperform’

Investing.com -- Shares of Fluence Energy Inc (NASDAQ:FLNC) fell 3.1% in today’s trading session after a notable downgrade from Jefferies analyst Julien Dumolin-Smith. The analyst cut the rating to ’Underperform’ from ’Hold’ with a price target of $3, citing a valuation disconnect and a slowing industry outlook.

The downgrade comes in the wake of the stock’s 20% rise since May 9, following tariff easing on China and a tax bill proposal initially seen as favorable for the Investment Tax Credit ( ITC (NSE:ITC)). However, Dumolin-Smith believes the market has misinterpreted the impact of these changes on the energy storage sector, particularly for Fluence Energy.

The analyst pointed out that the proposed Foreign Entity of Concern (FEOC) language in the draft tax bill could be more restrictive than anticipated, potentially harming U.S. storage companies that rely on Chinese supply chains for battery equipment. Dumolin-Smith also noted that the net impact of tariffs on Fluence Energy is mixed, as the company both competes with and imports from Chinese entities affected by tariffs.

Fluence Energy’s recent revision of its FY25 revenue guidance downward by 20% reflects the uncertainty and slowdown in the market caused by customers pausing projects due to tariff concerns. The analyst emphasized that the uncertainty alone is sufficient to decelerate market momentum, a sentiment already observed in the market’s reaction.

Furthermore, Dumolin-Smith expressed skepticism about the market’s optimism regarding Fluence Energy’s post-2025 outlook. The Street’s FY2026 growth projections of 26% year-over-year align with forecasts that have not been updated to reflect significant changes to the ITC or the possibility of returning to higher Chinese tariffs.

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The analyst concluded that the current stock price and Street estimates do not fully account for the risks facing Fluence Energy and the U.S. storage industry at large. With estimates more than 20% below the Street’s post-2027, the analyst has opted to wait for clearer tariffs and more flexible ITC guidance than what is currently proposed. As a result, the price target has been adjusted to $3 from the previous $4, reflecting a lower growth outlook due to competitive pressures, new tariffs, and the proposed ITC policy.

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