By Paul R. La Monica

The AI power story may be going strong, but for at least one initial public offering, Innio, Wall Street doesn't see much juice left in the tank.

Munich, Germany-based Innio went public on June 4 at a price of $27. It's now trading around at just under $39, more than 40% above its IPO price. The company also has U.S. headquarters in Waukesha, Wisconsin.

The big brokerages don't see prices moving much higher over the next year. At least 10 analysts initiated coverage on Monday, resulting in an average target of $44.60, about 15% above current levels. Innio was up around 3% in trading late Monday after falling earlier in the session, a sign that Wall Street wasn't more bullish.

There were also some lukewarm recommendations. Citigroup issued a Neutral rating on the stock. Deutsche Bank began coverage of Innio with a Hold, and RBC assigned a Sector Perform, another somewhat unenthusiastic rating, on the stock.

Why such a tepid reaction?

It's not Innio's core business: the company sells gas engines and its data center business is thriving. Although Innio lost money ($7.2 million) in the first quarter of this year, the company was profitable in both 2024 and 2025. Net income rose 57% in 2025 to $144.3 million, while revenue increased 22%.

The problem is much more about valuation. The stock, like many AI names, is now trading at a premium price. And the company may have to work a lot harder — signing more data center deals — for the stock to grow into its already steep valuation.

Bank of America's Andrew Obin has a Buy rating on the stock and a $46 price target. But Innio is trading at 116 times his earnings estimates for this year and 50 times his 2027 forecasts.

Obin is still bullish, launching coverage with a Buy and $46 price target in a report titled "The Little Engine that Could." Obin noted that while only 21% of Innio's equipment revenue for the past 12 months came from data centers, 61% of trailing orders were from data centers. That should mean big revenue ahead.

"Developers are turning to on-site power generation in response to long grid connection wait times," Obin wrote.

But Obin is also concerned about how rapidly data centers have been building out. There could be an inevitable slowdown ahead. "Doubling equipment capacity in three years comes with risks of construction delays and ramping labor," Obin wrote, adding that there are growing "risks of industrywide over capacity."

Goldman Sachs analyst Joe Ritchie, who issued a Buy rating on Innio with a $42 price target, is also cautiously optimistic that fundamentals will remain robust. He said in a report Monday that "power generation in the U.S. is undergoing an unprecedented demand cycle driven by data center expansion and electrification" and added that Innio "is uniquely positioned to benefit as it offers a fully gas-focused, distributed-energy solution that differentiates from many of its peers."

But he conceded that his bullish view is predicated on continued strength in capex spending from hyperscalers this year and next. Concerns about spending from the likes of Microsoft and Oracle are now weighing on some AI stocks. "If demand were to slow down materially, it would...result in downside risk to our estimates," Ritchie wrote.

These worries, when combined with the company's valuation, should give investors pause. That's why investors need to be cautious. As SpaceX and Cerebras Systems have shown, investor demand for new stocks can be fickle. If Innio doesn't live up to the hype when it reports its first quarterly earnings as a public company sometime later this summer, the stock could suffer the same fate as other IPOs that got off to a solid start and quickly fell out of favor.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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