Shares of Blink Charging (NASDAQ:BLNK) are down sharply in advance of the company’s earnings report. Is this an example of investors preparing for good news, or is it a sell-off in advance of a disappointing report?
At this point, I’m going to say it really doesn’t matter. Blink Charging is exactly what it is. That is, the company is one part of a duopoly in the electric charging station sector. Its main competitor is ChargePoint (NYSE:CHPT) which recently went public via a SPAC.
That makes the bullish case for Blink easy enough to understand. If 2020 taught us anything it’s that electric vehicles are coming whether we’re ready for them or not. And what works in the favor of Blink Charging is that, as a nation, our infrastructure is not ready to support electric vehicles on a mass scale.
Most residential homes are not equipped to handle overnight charging. The same is true for many commercial locations as well. And no matter how sophisticated battery technology becomes, a key sticking point to wide-spread EV adoption will be a charging network that’s as reliable and nearly as ubiquitous as our network of gas stations.
That being said, right now Blink Charging is a company that is not yet profitable, is light on revenue, and it moving higher largely based on hopeful news. That’s not a sustainable narrative.
Buying the News
Case in point, earlier in March, BLNK stock got a bullish bump when two California senators implored the Biden administration to set a firm date for phasing out gas-powered passenger cars and trucks. I’m being serious. BLNK stock jumped over 8% on the expectation of an announcement that was never going to happen.
That’s not to say the country has not made strides. Blink recently won a contract with the state of Ohio’s Environmental Protection Agency (EPA) to build a network of 144 charging stations throughout the state. And on that piece of news, BLNK stock jumped 17%.
However, in both cases, the stock failed to hold those gains. Is this a sign of electric vehicle fatigue? Or are investors returning to looking at the company’s fundamentals?
The Fundamentals Are Lacking
Once you get past the long-term narrative, you need to perform your own due diligence. And that’s where Blink loses a little juice from my perspective. The company continues to build out its network of charging stations, but it doesn’t have meaningful revenue.
Yes, in just three quarters of 2020 it has already surpassed its full-year 2019 revenue total by one million dollars. But the company’s earnings haven’t moved any closer to profitability. In fact, it’s fair to say they’ve inched a step backwards.
Plus, if you want to find something to be a little concerned about, you could look at the short interest in the stock which is above 30%. This suggests that there are a lot of investors believing BLNK stock is heading lower. And although institutional investor ownership has increased significantly in the past quarter, it still sits at below 20%.
Add to that news the fact that ChargePoint has gotten off to a lackluster start. Since CHPT began trading publicly on March 1, the stock is down 32%. ChargePoint has the world’s largest EV charging network. If its stock is struggling, perhaps there’s a larger story being told.
Look at BLNK Stock With Your Eyes Open
Blink Charging needs more revenue, a lot more, to grow into their valuation. Remember this is a company that’s been in business for some time and was trading as a penny stock for about four years. That all changed late last summer as the outlook for a more EV-friendly administration began to look brighter.
With all that said, it’s not Blink’s fault that their share price has rocketed up. And if the company can make the most of this opportunity there might be a narrative that supports a stock price that is still 33% higher than the consensus price target of the analyst community.
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The electric vehicle (EV) sector was nearly as frothy as the “pandemic stocks” in 2020. It wasn’t that the EV sector was dormant during the Trump administration.
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For starters, the Biden administration has already said it will prioritize climate change like no administration ever has. And one way they are going to do that is to incentivize the production and purchase of electric vehicles.
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