Battery stocks have more room to run despite recent rally, says Melius Research's James West
Speakers
James West
— Head of Energy and Power Research, Melius Research
Summary
James West of Melius Research says battery stocks have more room to run, citing long-duration storage needs and an early U.S. grid and AI data center buildout. He favors Bloom Energy, Fluence Energy, and Eos Energy Enterprises within that group. On natural gas, he sees high volatility, a near-term cold-weather spike above $4, and a spring pullback, with EQT as the best natural gas play and Baker Hughes also well positioned. He also warns that U.S. shale is in a long twilight as low oil prices favor Middle East and deepwater drilling.
- James West, Melius Research head of energy and power research, remains bullish on battery and energy storage stocks after their rally.
- He sees Bloom Energy benefiting from AI data center power needs and expects its run to continue.
- He names Fluence and Eos as early-stage battery infrastructure plays with more room to go.
- Natural gas is viewed as highly volatile, with near-term upside above $4 followed by a spring decline and roughly $4 needed to incentivize drilling.
- EQT is called the best-positioned natural gas play due to its scale and vertical integration.
- Baker Hughes is viewed as well positioned through natural gas and LNG equipment exposure.
- He warns that U.S. shale is entering a long twilight as low oil prices favor Middle East and deepwater drilling.
Ideas
Battery stocks still have more room.
Battery stocks still have more room to run because batteries are the fastest-growing subset of energy and energy storage, long-duration storage is necessary for grid reliability, and the U.S. grid infrastructure and AI data center buildout is only in its early stages.
Bloom's run likely continues on AI power.
Bloom has an interesting product portfolio and is well positioned for AI data centers in highly populated areas because its fuel cells are quieter than turbines and consume natural gas; despite the big run, the stock's run will probably continue.
Fluence early in battery infrastructure buildout.
Fluence is a packager of batteries and remains in the early stages of the battery infrastructure buildout needed to support the grid, so it has more room to go despite the battery stock rally.
Eos early in battery infrastructure buildout.
Eos is a developer of batteries and remains in the early stages of the battery infrastructure buildout needed to support the grid, so it has more room to go despite the battery stock rally.
Natural gas volatile, spike then spring decline.
Natural gas should see massive volatility over the next several years because the U.S. needs more pipeline infrastructure into data center regions, while winter cold can push prices well over $4 near term before spring brings them back down; roughly $4 is needed to incentivize most U.S. natural gas drilling.
EQT best natural gas upstream play.
EQT is the best-positioned natural gas play right now because it is the largest U.S. natural gas producer with a vertically integrated strategy spanning infrastructure, drilling and production, and the coming PJM emergency auction should add more upstream gas demand.
Baker Hughes well positioned for gas.
Baker Hughes is well positioned because it sells a lot of equipment into natural gas and LNG, which is part of the broader natural gas story.
US shale in twilight, unprofitable low prices.
The U.S. shale industry is in the early stages of its twilight because oil prices have been pushed too low to be profitable in areas like the Bakken, while Middle East and deepwater drilling have been incentivized and are very competitive versus U.S. shale.
