Here is Why FLNC is an Asymmetric Opportunity
1/ $Fluence Energy, Inc.(FLNC)$ is the leading utility-scale battery provider with 5x potential.
Power demand is exploding due to rapid data center buildout.
Most of the new capacity should come from renewables, where storage is critical.
Here is why FLNC is an asymmetric opportunity: 🧵
2/ First, some background.
AI is driving rapid data center buildout across the world.
Bloomberg expects that data center power demand will quadruple in the next 10 years.
Where will this supply come from?
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3/ Most of the supply will come from renewables.
Fossil fuels will be largely depleted in the next 50 years, so renewables and nuclear are the only options.
Bloomberg expects 70% of power will come from renewables in 2050.
However, renewables come with challenges..
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4/ One of the critical bottlenecks is storage.
Solar and wind are dependent on the weather conditions.
Nature decides when we generate energy, when we don't.
Thus, when possible, all the energy should be generated and stored for later use & transmission.
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5/ This is also critical for data centers.
Regardless of whether they consume from the grid or also have on-site generators, they need storage to:
- Use as backup
- Regulate frequency in the grid
This way, they can avoid blackouts that could lead to the collapse of whole systems or frequency irregularities that could damage valuable equipment like servers and GPUs.
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6/ FLNC is one of the leaders in utility-scale storage solutions.
It has three integrated businesses:
- Storage solutions
- Long-term maintenance services
- Software for energy trade and monitoring
This integrated stack differentiates it from competitors and makes it a preferred partner for energy solutions.
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7/ Result? The business is booming.
It grew its revenues by 34% annually in the last 5 years, driven by strong demand for energy storage.
It also hit the inflection point and became profitable last year.
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8/ Largest hyperscalers are already its customers.
In 2022, Amazon bought 225MW storage capacity, followed by Google, which bought a 2.75MW battery system for its St. Ghislain data center.
In 2023, Meta ordered a 1,200 MWh storage system in its Arizona data center.
This is just the beginning.
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9/ Bloomberg expects that renewable capacity will nearly triple in the next 5 years.
This will drive demand for energy storage.
Meaning, even if it grows at the same rate as the renewable capacity, the company can easily achieve 15% annual growth until 2030.
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10/ The valuation is extremely attractive.
It generated $2.7 billion in revenue last year.
Assuming just 15% annual growth for the next 5 years, it can generate over $5.4 billion in revenue in 2030.
Assuming the industry average of 15% net margin, it can generate $810 million in net income in 2030.
Slap a conservative 15 times earnings, and we get a $12.15 billion company.
It is currently valued at just $3 billion, meaning it promises nearly 5x return in 5 years with limited downside as it's currently trading at 1x sales.
Long FLNC.
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