Global Energy Storage Will Confront Challenges And Create Opportunities

Key Takeaways

• Aggressive growth expectations and optimism about recurring cash flows may not materialize due to project execution risks and potential regulatory or market headwinds.
  
• Dependence on favorable policies and competition from alternative storage technologies threaten long-term market position and could pressure margins and valuation.
  
• Strategic expansion into recurring, high-margin service contracts and an "own and operate" model enhances revenue visibility, reduces earnings volatility, and supports sustained long-term profitability.

Catalysts

Develops and deploys utility-scale energy storage solutions in United States, Australia, and internationally.

• The market appears to be pricing in significant recurring EBITDA growth over the next few years, driven by expectations that newly announced Asset Vault projects and a $300M preferred equity investment will unlock over $1 billion in CapEx and rapidly scale up owned and operated storage assets; however, actual project execution and timely commercialization may face delays or operational risks, which could impact future revenue and ultimately leave earnings below current optimistic projections.
  
• Current valuation may be reflecting outsized optimism that long-term service contracts and offtake agreements in existing and new markets (U.S., Australia, Europe) will consistently translate to high-margin, predictable cash flows, yet global interest rate volatility or changing regulatory incentives could limit investment appetites, making it more difficult to secure financing or close projects as forecast-potentially suppressing future net margins and cash flow.
  
• Investors seem to be assuming that government support and incentives (such as ITCs and long-term energy service agreements) will remain favorable and provide ongoing tailwinds for project economics; any shift in policy focus or regulatory complexity (e.g., towards alternative storage technologies or local content requirements) could materially reduce the addressable market and future revenue growth.
  
• The company's strategy to prioritize large, capital-intensive energy storage projects may be vulnerable to rapid advancements and cost reductions in competing storage technologies, particularly lithium-ion batteries, which could outcompete gravity-based storage solutions and pressure both future order pipelines and gross margins.
  
• Energy Vault's backlog and development pipeline growth may be driving up equity valuations on the assumption of seamless execution and conversion to revenue/EPS expansion; however, persistent risks around prolonged commercialization cycles, project-based revenue recognition, and the potential need for additional future capital (despite nondilutive intent now) could weigh on long-term earnings and compress valuation multiples if execution falls short.

Energy Vault Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Energy Vault Holdings's revenue will grow by 117.5% annually over the next 3 years.
• Analysts are not forecasting that Energy Vault Holdings will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Energy Vault Holdings's profit margin will increase from -279.4% to the average US Electrical industry of 10.2% in 3 years.
• If Energy Vault Holdings's profit margin were to converge on the industry average, you could expect earnings to reach $54.0 million (and earnings per share of $0.28) by about September 2028, up from $-144.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 5.1x on those 2028 earnings, up from -2.4x today. This future PE is lower than the current PE for the US Electrical industry at 29.6x.
• Analysts expect the number of shares outstanding to grow by 6.4% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.92%, as per the Simply Wall St company report.

Energy Vault Holdings Future Earnings Per Share Growth

Risks

• The $300 million preferred equity investment, enabling over $1 billion in project CapEx and supporting nearly 3 GW in development pipeline across the U.S., Australia, and Europe, could catalyze substantial recurring EBITDA and cash flows through expanded project execution-potentially boosting future revenues and stabilizing long-term earnings.
  
• The shift to an "own and operate" model (Asset Vault) with long-term offtake agreements and recurring high-margin service contracts delivers predictable, highly visible cash flows and reduces the historical lumpiness of project-based revenues, directly supporting EBITDA growth and improving earnings consistency over the long run.
  
• Expanding backlog (up 47% quarter-over-quarter and 120% year-to-date to $954 million) and a developed project pipeline of $2.4 billion indicate strong long-term demand and execution capability, which could result in continued revenue expansion and higher earnings visibility.
  
• Successful project delivery and positive reputation with major stakeholders-including large utilities, government entities, and infrastructure funds-demonstrate robust execution and "bankability," which may enable Energy Vault to attract additional capital partnerships and customers, reducing financial risk and supporting margin expansion.
  
• High-margin, recurring service agreements (with 30–40% margins) and enhanced economies of scale across EPC (engineering, procurement, construction) activities-plus future integration opportunities-stand to strengthen company-wide gross margins and support a transition toward sustained profitability at both the project and corporate levels.

Valuation

• The analysts have a consensus price target of $1.1 for Energy Vault Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $1.7, and the most bearish reporting a price target of just $0.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $531.8 million, earnings will come to $54.0 million, and it would be trading on a PE ratio of 5.1x, assuming you use a discount rate of 8.9%.
• Given the current share price of $2.15, the analyst price target of $1.1 is 95.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.