• Blink Charging stock has dropped over 50% YTD but offers potential upside if the EV market rebounds, trading near multi-year lows.
• Blink’s integrated EV charging ecosystem, diverse business models, and expanding service revenues position it well for future growth despite recent financial struggles.
• The stock is currently undervalued, trading at 1.1 times forward sales, with Wall Street forecasting a potential 184% increase within 12 months.
• Risks include competitive pressures, regulatory changes, and the uncertain path to profitability, but the current low price makes it a speculative buy.

Elevator Thesis

Blink Charging (NASDAQ:BLNK) stock has taken a battering at the stock market over the past year, shedding more than 50% of its value YTD. The EV market has been under major duress over the past 12 months, and

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Blink Charging Stock: Substantial Risk But Has Sizeable Upside Potential appeared first on Up2info.com.

• Initiating coverage on Blink Charging with a “Buy” rating, citing attractive valuation post-correction and a promising 24-month investment horizon.
• Higher EV adoption hinges on ramping up charging infrastructure; Blink’s presence in the U.S. and Europe positions it well for growth.
• Despite muted earnings and cash burn, cost-cutting measures and potential positive EBITDA by 2025 are key triggers for stock upside.
• Blink’s valuation metrics and analysts’ price targets indicate significant upside potential, making it a compelling buy at current levels.

Investment Overview

I am initiating coverage on Blink Charging (NASDAQ:BLNK) stock with a “Buy” rating and an investment horizon of 24 months. I believe that Blink stock is attractively valued after the recent correction, and it’s a good accumulation opportunity. This initiating coverage discusses the industry and company specific fundamental factors that back the bull thesis.

It’s worth noting that in mid-July, Blink stock was trading at $3.7. There has been a sharp correction of 46% from those levels with the stock currently trading at $2. The key reason for the downside was Blink Charging missing Q2 2024 earnings estimates. Further, the company’s guidance for 2024 is below the consensus outlook.

However, a relatively lower earnings guidance has been discounted in Blink stock. I believe that there are potential positives that can translate into the stock trending higher over the next 24 months.

In my view, the basis for the bull thesis is the fact that higher EV adoption is unlikely without a ramp-up in charging infrastructure. The adoption of EVs is lower than anticipated and macroeconomic headwinds have played spoilsport.

However, a survey from McKinsey indicates that many buyers are unwilling to consider EVs until the availability of chargers is equivalent to that of gas stations. Similarly, a S&P Global survey indicates that affordability is the biggest deterrent in purchasing an EV followed by the lack of charging infrastructure.

Therefore, big investments in the EV charging infrastructure are critical and companies are positioned to benefit even amidst intense competition. I must add here that EV companies are increasingly focusing on low-priced models. That has the potential to accelerate EV adoption if the charging infrastructure is ramped-up.

Coming back to Blink Charging, presence in the United States and Europe implies a big addressable market. To put things into perspective, The European Commission has set a target of 3.5 million charging points to be installed by 2030. To achieve this target, 8,000 public charging points must be installed per week.

For the United States, McKinsey estimates that there will be 9.5 million charging ports by 2025. This is likely to increase to 28 million by the end of the decade. The growth potential for the industry is therefore significant, and I believe that Blink Charging is positioned to survive and grow.

Fundamentals Likely to Improve

Driving top-line growth has been a lesser concern for emerging EV charging companies. The markets have factored the sustained cash burn in valuations. This is one of the reasons for Blink stock remaining depressed. I, however, believe that fundamentals are likely to improve over the next 12 to 24 months. This will have a positive impact on the company’s valuations.

For 2023, Blink Charging reported revenue growth of 130% on a year-on-year basis to $140.6 million. While revenue growth was stellar, Blink reported adjusted EBITDA loss of $57 million. It’s worth noting that when Q4 2023 results were reported, Blink had guided for positive adjusted EBITDA by December 2024. However, the company now believes that EBITDA break-even is likely in 2025. This is another reason for Blink stock trending lower.

For the first half of 2024, Blink reported revenue growth of 30% on a year-on-year basis to $70.8 million. Adjusted EBITDA losses also narrowed by 20% for the period. However, for the full year, Blink has guided for revenue of $150 million. On a year-on-year basis, growth is therefore likely to be muted.

While these headline numbers provide some insight, I believe that the following points are worth noting.

First – Between 2022 and the first half of 2024, the total operating expense as a percentage of revenue declined by 8,200 basis points. While the company has delayed the time-line for EBITDA break-even, there is a gradual narrowing of EBITDA level losses.

Second – In September 2024, the company announced reducing the global personnel count by 14%. This is likely to have an annualized cost-saving impact of $9 million and will contribute to significant margin improvement in 2025.

Third – In March 2024, Blink Charging announced the expansion of its manufacturing facility in Bowie, Maryland. The company expects to boost gross margin by enhancing vertical integration. It’s also worth noting that Blink currently produces around 15,000 EV charging units annually. The company is targeting to boost production to 50,000 units annually. Besides the potential impact on top-line growth, I expect economies of scale to drive margin expansion.

Fourth – For the first half of 2024, Blink reported product sales revenue growth of 25% on a year-on-year basis. For the same period, service revenue increased by 38%. The key components of service revenue include charging service revenue, network fees, and ride-sharing. As the number of charging ports deployed increases, the higher margin software and recurring service sales revenue will swell. This will have a positive impact on the EBITDA margin.

On the flip-side, Blink Charging reported a cash buffer of $73.9 million as of Q2 2024. In the last six months, the company’s cash buffer has declined by $47.8 million. With ongoing cash burn, it’s likely that Blink will dilute equity in the next 6 to 12 months. This dilution risk for the stock can be potentially mitigated if EBITDA losses continue to narrow in the coming quarters.

Possibility of Renewed Growth Acceleration

I mentioned earlier, that for 2024, Blink has guided for revenue of $150 million. On a year-on-year basis, revenue growth is expected at 7%. This implies a significant growth deceleration and has contributed to the decline in Blink stock.

I, however, believe that the company is positioned for renewed growth acceleration. The reasons for this view are as follows –

Blink Charging is targeting to boost its annual production to 50,000 charging units from the current level of 15,000 annually. Over the next few years, incremental production is likely to have a positive impact on growth.

In the United States, Blink Charging has the third largest EV charging network and the company derives 75% of its revenue from North America. Considering the growth potential in Europe, there is ample scope for penetration in the next five years. As manufacturing is ramped-up, it’s likely that international expansion will gain traction.

Macroeconomic headwinds have been a key reason for a slowdown in EV sales. This has also impacted EV charging companies. With expansionary monetary policies in the United States and Europe, it’s likely that EV sales will accelerate in 2026 and beyond. This will positively impact demand for EV charging units.

I mentioned earlier that high cost of EV ownership is among the top reasons for slow adoption. However, the market dynamics are changing, and EV companies are looking at low-cost models to drive mass adoption. I had discussed about the changing market dynamics in my recent coverage on Polestar Automotive (PSNY).

Blink Charging has a comprehensive product suite that includes L2 and DCFC chargers. Trends indicate that there is significant growth in DCFC chargers, considering the total public EV charging ports. In private EV charging, L2 remains dominant. With DCFC chargers giving a significant high range per hour of charging, I expect robust growth to sustain for DCFC public charging ports backed by federal and state incentives. Blink is well positioned to capitalize on this opportunity.

It’s interesting to note that the company operates an EV car-sharing and ride-sharing business through its wholly owned subsidiary, Blink Mobility. For FY2022 and FY2023, the ride-sharing business revenue was $1.3 million and $3.3 million respectively. If first half 2024 revenue is annualized, the segment is likely to report revenue of $4.6 million this year. It’s a small business that’s witnessing healthy growth. Over the next five years, there is potential for value creation from Blink Mobility. At some point of time, I see a potential business demerger.

In June 2024, Blink Charging received “In Process” designation that’s “granted by the Federal Risk and Authorization Management Program (FedRAMP®) for its EV charging solutions.” This takes the company closer to providing cloud-based EV charging solution across U.S. government. The federal agencies have a goal of transitioning federal fleets to all electric vehicles by 2035. The “In Process” designation is therefore an important step towards higher revenue contribution from the government segment.

Risk Factors

Based on the discussion, I believe that Blink Charging is positioned for growth and gradual EBITDA margin expansion. However, this view can potentially be impacted by few risk factors.

First, If the global downturn is steeper than expected, the return to accelerated growth for the EV industry will be delayed. This can prolong the company’s cash burn as a key factor is economies of scale and aggressive deployment of company-owned charging points.

Second, given the company’s guidance for positive adjusted EBITDA in 2025, I see another round of equity dilution. This is likely to have a negative impact on the stock. However, if growth accelerates and margin expansion is significant, I expect Blink stock to trend higher even after the potential dilution.

Third, industry competition remains intense. A Bloomberg article points out that “getting chargers on ground is only one of several challenges for operators.” There needs to be higher “reliability, efficiency and site-selection.” The author also believes that companies without “enough financial backing to see through low utilization periods will go out of business”

I, however, believe that Blink, as the third largest EV charging company in the United States, is positioned to survive competition and emerge stronger. Also, over the next 24 months, the company’s credit metrics are likely to improve significantly. However, the key factor is to achieve EBITDA break-even potentially in the second half of 2025.

Concluding Views

I believe that muted earnings are a temporary setback for Blink Charging. The company is focusing on cost-cutting, and potential positive EBITDA in 2025 is a trigger for stock upside. Additionally, as expansionary policies have a positive impact on the EV industry, Blink is likely to see growth acceleration. The deep correction therefore provides a good entry opportunity.

From a valuation perspective, Blink Charging trades at a forward EV/Sales of 0.94, which is at a discount to the sector median of 1.93. Further, a forward price-to-book of 0.79 is also at a discount to the sector median. This underscores my view that Blink stock is worth considering at current levels.

I must add that eight analysts have a 12-month forward median price target of $4. This would imply an upside of 105% from current levels. The most bearish price target is $2 and Blink stock trades around those levels. Therefore, I believe that the downside is capped, and the upside potential is significant.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Blink Charging: Correction Provides A Good Entry Opportunity appeared first on Up2info.com.

• Charging solutions provider Blink Charging’s declining stock price is explained by not just a weak EV industry trend but also by its own disappointing performance.
• Its revenue growth has dwindled to almost nothing in Q2 2024 and the outlook for 2024 has been downgraded too.
• While EV sales growth is expected to be healthy in the future, it’s best to wait and watch how BLNK performs over the next quarters before considering buying the stock.

When I last wrote about the EV charging solutions provider Blink Charging (NASDAQ:BLNK) in May, I had anticipated an upgrade in the company’s revenue projections for 2024. I couldn’t have been more wrong.

The company’s numbers took a nosedive in the second quarter (Q2 2024) earlier this month, prompting a downgrade in the outlook for the year. Here, however, I explore whether there are any redeeming factors for the company for the remainder of the year and beyond based on the following:

• The details of its latest financials and outlook.
• The EV industry outlook and its competition.

Revenue: Outlook Downgrade on Weak Trend

As per Blink Charging’s latest guidance, it now expects revenues to fall in the range of USD 145-155 million for the full year 2024. This is a ~12% reduction at the midpoint from the earlier projected range of USD 165-175 million. It’s some comfort that revenues are still expected to grow. But the extent is a far smaller 6.7% at the midpoint of the guidance range, compared to an expected 20.9% rise seen earlier.

Sharp revenue growth contraction in Q2 2024

The guidance reduction follows exceptionally weak revenue performance in Q2 2024, which saw just 1.3% year-on-year (YoY) increase. The growth figure is small even on its own, but it’s ever more glaringly so when seen in perspective.

A year ago, in Q2 2023, revenues had risen by a massive 186% YoY. It would be tempting to chalk up the latest softening to a high base effect, but that’s not a convincing explanation. The company had seen robust growth in Q2 2023 even though revenues rose by almost 164% YoY in Q1 2022.

Further, even more recently, in Q1 2024, growth had been far healthier at 73.4% YoY. This even brings up the figure for the first six months of 2024 (H1 2024), to a far healthier 30% YoY.

Product revenues are worst affected

Product revenues, which are the biggest contributor, accounting for 72% of the total in H1 2024, were the worst impacted in the latest quarter. They saw a 4.1% YoY contraction in Q2 2024, dragging down overall growth even as the other segments saw double-digit growth. Even then, it’s worth noting that services and other revenues have also seen a growth come-off in Q2 2024. This is evident from the table below, which shows that their growth is much softer in the latest quarter compared to H1 2024.

Revenue expected to weaken further in H2 2024

The company ascribes the latest revenue decline to “the general short-term softening of EV demand”. Presumably, this is a lagged impact of weak EV sales in Q1 2024, when the number rose by just 2.6% YoY in the US before seeing some bounce back with an 11.3% YoY increase in Q2 2024.

But here’s the rub. Going by the latest guidance, the company doesn’t expect any growth improvements in H2 2024. On the contrary, assuming that the revenue comes in at the midpoint of the guidance, it will see an 8.1% YoY contraction during this time. This is a huge disappointment after the company saw a massive compounded annual growth rate [CAGR] in revenues of 124.4% over the past five years.

Profits: Mixed trends and outlook

With market weakness underway, Blink Charging has also moved its expectations for adjusted EBITDA profitability to 2025 now, from 2024 earlier. This follows an 8.9% YoY increase in adjusted EBITDA loss to USD 14.7 million, after it saw an encouraging 43% YoY contraction in loss in Q1 2024.

It’s some solace, though, that the company continues to expect the gross margin to come in at 33%, sustaining its earlier projections and the expectation of some improvement over the 31.6% level seen in 2023. This gross profit though has declined by 13% YoY in Q2 2024, in line with the softening in revenues, which isn’t a good sign considering that it has already moved the expectation of adjusted EBITDA profits to next year.

It does point out the reduction in operating expenses as a proportion of revenues (see chart above) since 2022, but this doesn’t give encouragement that it will become profitable anytime soon either. This is because the operating loss margin expanded to 62.1% in Q2 2024, from around 54% in H1 2024. The point being that much like the rest of the earnings report, the performance looks better because of a far healthier Q1 2024.

Charging solutions impacted significantly

With this as the background, it’s hardly surprising that the momentum is firmly against BLNK. The stock is down by a huge 53% since I first wrote on it in November last year. It’s hardly alone on this front, though Blink Charging’s closest competitor ChargePoint Holdings (CHPT) is down by 45% over this time as well.

To be fair, the sentiment towards the EV ecosystem has been negative over the past year. But it’s clear that the charging solutions segment has been particularly impacted, considering that the S&P Kensho Electric Vehicles Index is down by a far smaller 5.7% during this time.

De-emphasizing Market multiples

In an environment of weak performance and negative momentum, the market multiples have to be truly compelling to make a case for BLNK. This isn’t the case, even though they are better placed than CHPT. The stock’s trailing twelve-month [TTM] price-to-sales (P/S) ratio is at 1.13x compared to 1.53x for CHPT, the forward ratio is at 1.45x, compared to CHPT’s 1.52x.

Some premium over CHPT is justified too. The company has seen declining revenues for the past three quarters, after seeing just 8.2% growth in its last financial year ending January 2024. Still, it’s hard to ignore that BLNK’s forward P/S isn’t very different from the 1.47x for the industrials sector as such.

Can the longer term be better for BLNK?

There is hope for a better future, though. And not just in the longer term. Going by EV sales projections, H2 2024 may well throw up improvements for Blink Charging despite its sagging forecast. Consider the following:

• The biggest proportion of 60% of the company’s revenues come from the US market. In Q2 2024, the market has seen an improved growth. While there remains uncertainty about the US consumer economy for the remainder of 2024, if this recent improvement is sustained, there could be more buoyancy in revenues for Blink Charging than is currently factored in.
• The International Energy Agency expects global EV sales to grow by 20% this year. The company gets a substantial 40% of its sales from outside the US, so there’s a possibility that international demand can pull up its overall revenue.

Even if Blink Charging’s revenues don’t quite surprise in H2 2024, there’s hope for the longer term. EV sales in the US alone are expected to grow at a CAGR of 18% between 2024-28, indicating sustained demand in the medium term. Analysts estimates on Seeking Alpha, too, are bullish on Blink Charging’s revenue growth from 2025 onwards, expecting double-digit increases in the years ahead (see graphic below).

However, projections can be subject to change based on evolving conditions. And there’s no real reason to believe that consumer demand will go from weak to booming anytime soon, in my opinion, with uncertainty in key consumer economies. So even if demand does regain speed, it might not necessarily be according to the forecasted timeline.

Investing takeaways

However, for now, it’s hard to overlook the sharp decline in Blink Charging’s revenue growth. Projections for EV sales and its presence in international markets suggests a possibility that H2 2024 might turn out better than anticipated now. But I’m not holding my breath, not after the recent results.

But there’s hope for the future, as evident in the industry and analysts’ revenue projections for Blink Charging. Whether or not demand bounces back in the projected timelines, though, remains to be seen. Especially when there’s still uncertainty on the consumer economy.

Right now, it would be a good idea to wait and watch before making an investment decision. I’m going with a Hold rating on Blink Charging.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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• Blink faces challenges from slow charging infrastructure growth and strong competition, impacting EV adoption and its market position.
• Strategic acquisitions offer potential, but slow EV uptake and automaker hesitancy create uncertainty for Blink’s growth outlook.
• Investment risks and current valuation metrics suggest a Hold rating, with a target price of around $2.3-$2.4.

Introduction

As one of the top charging station networks in terms of station size in operation, Blink Charging Co. (NASDAQ:BLNK) consistently develops charging products to accelerate the growth of EV usage. Blink currently owns 90,000 chargers globally, which is a significant player with strong growth potential given the rising carbon-free narrative and EV manufacturers.

Most importantly, the CEO, Brendan Jones, in the Q2 2024 announcement, affirms that the management is committed to positioning Blink for long-term growth and value to its shareholders. The company continues to lean towards advancing energy transition and expanding charging points globally through its continuous innovative charging technology.

However, the EV industry, on which the charging sector is dependent, is also facing a lot of problems, such as slower sales and problems with infrastructure. As such, in this analysis, we are going to dive into different risks for the company and think that it will continue to impact Blink for the next few years. Therefore, we rate Blink as a Hold.

Latest earnings update: Q2 2024

The company recorded a number of positives, but there were no key strong positives as the stock went bearish by 7.5% to $2.34 immediately after reporting Q2 2024.

Most of the analysts’ expectations fell short, with revenues recording $33.26 million over analysts’ forecast of $38.97 million, which is a miss of 14.6%.

EPS (non-GAAP) recorded -$0.18 over analysts’ forecast of -$0.13, which is a loss of $0.67 per share. Considering these Q2 2024 results, BLNK remains a solid business. The increase in operating margin shows the company is improving on efficiency, and it is strongly on its way to full recovery with the currency trading price. However, as the analysis title suggests, the company is still facing some difficulties in the industry.

Unmatched supply of charging points with high EV sales

According to McKinsey research, EV sales exceeded ten million units in 2022 and increased by 50% from 2021. However, the increase in EV sales is not equally matched by the installation of private and public chargers. By 2022, the United States recorded 2.6 million charging ports, but the increase in EV sales every year creates an approximate demand of 9.5 million ports by 2025 and 28.0 million chargers by 2030. The demand for charger points continues to increase, but the charging ports are slowing consumer adoption due to convenience matters such as range and accessibility. Inconvenience is creating a reduced demand for EVs, whose ripple effect on Blink stocks is a decline in demand for charging stations.

Inconvenience created by uneven charging installations

Therefore, slower consumer demand for EVs

Charging providers such as Blink have failed to offer convenience in charger accessibility and range. Users of EVs do not experience a similar convenience as users of internal combustion engines (ICE). Consider the survey conducted by McKinsey, where respondents prefer buying an alternative traditional ICE car before transitioning to EVs. 40% of respondents consider charging ports the main hindrance to EV purchase as they are not equivalent to gas station installations. Therefore, the stability and growth of Blink chargers is pegged on the company’s ability to meet the customers’ expectation

29% of EV owners are actively shifting back to ICE because of port charging difficulties

Charging ports inconvenience driving consumers’ unwillingness to transition to EVs

Ultimately, manufacturers scaling down production

There is a decrease in consumer demand due to inconvenient charging ports as the demand for EVs continues to decline. However, there is a forecasted increase in sales in the future. Auto manufacturers such as General Motors, Mercedes-Benz, Jaguar, Aston Martin, Land Rover, and Volkswagen have started to scale down and delay EV manufacturing plans. Even Tesla, the U.S. leader in EV manufacturing and charger points, through its CEO Elon Musk, announced plans to lower its growth rate. While this positively impacted Blink charging stock, it emerged as a deceleration of its usefulness in the long term.

Competitive landscape

Admittedly, Blink is not the most competitive rival in the EV charging sector, in terms of coverage and speed of charging. Some competitors, such as Tesla Inc., are far ahead of Blink regarding efficient superchargers

Blink faces competition from its peers, such as Tesla, whose CEO, Elon Musk, announced its intention to invest $500 million in new superchargers. Tesla, Inc. (TSLA) is a strong competitor to Blink’s business because it can produce the most efficient and fast charging points.

ChargePoint Holdings, Inc. (CHPT) is also a notable competitor of Blink, with a market capitalization of $1.79 billion compared with Blink’s $190 million. Despite Blink Charging’s size, it still faces competition from Tesla’s Supercharger network, which is compatible with multiple EV automakers. On the other hand, EVgo, Inc. (EVGO) has the edge over Blink Charging in fast charging capability.

Blink’s competitive edge is in 60kW—360kW D.C. fast chargers designed as an all-in-one charging point for serviceability and speed. However, in June 2023, Blink announced its intent to make 240 kW Fast Chargers accessible to most users of Blink chargers. This reveals that Blink is facing unfavorable competition in the market.

Blink Charging network	Tesla network

Click to enlarge

BLNK’s future strategic positioning

Blink is increasing investor confidence following its strategic decision to acquire SemaConnect, an EV infrastructure company that manufactures EV charging infrastructure in Maryland. In scaling its network, Blink is now manufacturing, owning, and operating its charging points, a positive indicator for investors.

Implications of owning network operation instead of selling

Blink has attained a vantage point in acquiring SemaConnet, which is its research and development while manufacturing and operating its EV chargers. This is an opportunity for Blink to accelerate and fully control its supply chain to speed up EV adoption. This is a strategic plan to scale the production of 50,000 chargers yearly from the current production of 10,000 EV chargers at reduced costs. With the Q2 2024 announcement, the Blink report on charging points sold, deployed, and contracted to be 4,106, indicating a risk of failing to achieve its forecasted 50,000 charging points per year.

Future demand for charging ports

The transition towards electric mobility is gaining a slow momentum, with minimal research on how battery-powered vehicles will overtake ICE convenience. The projection of EV sends a warning to Blink investors with 1% EV on U.S. roads and expected 9% by 2040. This is an indication that Blink charging investors may not realize profits any time soon. With the Q2 2024 announcement, the Blink report on charging points sold, deployed, and contracted to be 4,106, indicating a risk of failing to achieve its forecasted 50,000 charging points per year.

When investing in Blink, investors should observe key events going forward, such as a significant increase in charging infrastructure. With 4,106 charging point installations, this is an opportunity for Investors to earn more. Installations of significant charging points and reduction of costs will position Blink towards steady growth in the EV transition.

Valuation

In terms of valuation multiples, its listed peers all share similar ratios and trends – P/S ratio bottomed at the range of 1.5 – 1.6x. I forecast that the ratio will not change substantially and will remain at a similar level since the sector is going to be troubled by the EV / ICE car debate and trend in the next 2 – 3 years, especially since the economy is in a downtrend and EVs are generally more expensive.

Despite Blink growing its revenues by 130% in 2023, at $140.6 million, the company’s stock is still at record lows. Blink stock reacts to myriad events, among them declining product sales during cold weather when EV use is low and over-reliance on certain product revenue. The consensus revenue growth in the next 3 years is generally at 20%, which translates into around $170 million and $200 million in revenue in 2024 and 2025 respectively.

Therefore, the target price based on the comparable multiple and revenue forecast for 2024 is around the $2.3 – $2.4 range, which is a Hold for me.

Investment risks

• Intense competition: The EV charging points face competition from alternative fuels, rapidly evolving chargers, ever-changing technologies, and new entrants. These competitions threaten Blinks’ stock performance. Therefore, Blink will have to conduct more research and development on charging technology.
• Technological and regulatory revolution: Developments such as Tesla’s fast charging technology pose a significant risk to Blink charging points. The most innovative technologies could replace the current charging solutions, rendering Blink charging points obsolete. Also, the government is evolving regulations to maintain industry standards.
• Demand dependence on the EV industry: The demand for EV cars sold determines the charging point performance. This means that overreliance on the EV market poses a significant risk to investors.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Blink Charging: Company’s Future Hinges On Sluggish EV Growth appeared first on Up2info.com.

• Blink Charging’s stock price has been softening in recent months, in line with the lacklustre performance of the EV sector.
• Its revenue growth forecasts for 2024 aren’t encouraging either, though guidance can be upgraded after Q1’s performance, its own business developments and past history of upgrades.
• The company’s improved gross margins and shrinking adjusted EBITDA loss also work in its favour.
• However, the market multiples are unconvincing at a time when the EV market is softening in the US, making it a wait-and-watch situation.

Since I last wrote about the EV charging solutions provider Blink Charging (NASDAQ:BLNK) in November last year, its price is down by ~28%. This compares poorly with even the S&P Kensho Electric Vehicles index, which has barely moved over this time in any case.

However, the trends improve when a narrower time frame, like year-to-date is observed. While BLNK is still down, by 5.9% (see chart below), it’s a slightly lesser decline than that for the index at 6.2%. This raises the question of whether Blink Charging can stand out in the industry now? Or whether investors can still expect it to remain weak?

Revenue growth strong, but relatively softer

The first point of focus is the company’s revenue growth, it’s unique selling point, with a compounded annual growth rate (“CAGR”) of 126% over the past five year. While it’s growth remains robust as per the latest first quarter (Q1 2024) results, released earlier this month, at a 73% year-on-year increase, the figure is still a relative softening. Not just compared to the five-year CAGR but also the 130% increase seen in 2023 and even the 89% YoY rise seen in Q4 2023.

While some softening can be expected as the base figure expands, a look at the trends in the EV market are worth considering here too. It’s no coincidence that EV sales in the US slowed down in the past quarter. Sales grew by just 2.6% YoY compared to a 46.4% increase in Q1 2023.

Guidance upgrade possible

Does this mean that Blink Charging is doomed to slowing growth from now on even as its yet to attain profitability? Going by its forecasts for 2024, it would certainly appear so. It expects revenues to range between $165-$175 million this year. At the midpoint, this is just 20% revenue increase. However, there are three reasons to expect that the actual outcome might be better.

#1. Past guidance exceeded

Even with the relative slowing down seen in Q1 2024, the company’s growth is far in excess of the target growth. This indicates that a guidance upgrade is possible further into the year, especially going by last year’s experience. The actual revenues of $140.6 million exceeded the midpoint of the initial guidance range by 34%. Blink Charging subsequently upgraded its 2023 target, but the actuals ended up higher than even the upper end of this revised guidance by ~6%.

#2. Business progress

The company’s recent business developments certainly makes room for optimism. The most noteworthy of these is it being chosen as the official EV charging services provider for the State of New York, which had the sixth largest number of EV registrations among all US states as of July 2023 (see chart below). Other developments include its partnerships with the UK’s parcel delivery provider Evri, the City of Frederick, Maryland among others (see section on ‘Recent Quarter Highlights’ for details in its Q1 2024 earnings report).

#3. The Tesla (TSLA) drag

There’s also hope for improvement in the EV market moving forward. As the company pointed out in the latest earnings call, the drag is on account of a declining market share for Tesla. Of course this means that the demand for the company’s EVs hasn’t been absorbed by other manufacturers. This is a warning especially at a time when the US economy is seeing signs of a slowdown. However, there’s room for hope too considering:

• Nine EV manufacturers saw over 50% sales growth in Q1 2024, even if their absolute numbers are far smaller than those for Tesla.
• The company also points out to continued growth in Europe in its earnings call, especially in countries like Belgium, the Netherlands, and the UK, which can be a positive for it.

This said, it’s still likely that 2024 will be a slower year for Blink Charging. Even if actuals exceed guidance by the same margin a

Gross margin expands, for now

What the company now lacks in revenue growth, however, it makes up for in an expansion of the gross margin. In Q1 2024, it came in at 36%, a nice increase from the 29% for the full-year 2023 and 25% in Q1 2024.

It’s obvious that with slowing sales growth, the margin improvement comes from a smaller increase in of the cost of revenues. Indeed, the figure declined to 59.6% of revenues compared to 68.4% for 2023, and 71.9% even a quarter ago. This is essentially due to a softening in the pace of increase in the cost of its big product sales component to 41.5% compared to 131% for the full year 2023.

But investors need to brace for a softening in margin going forward, considering that the company targets a 33% level for the full year 2024. This would still be an improvement from last year.

Getting closer to adjusted EBITDA profitability

Even then, the company is inching towards adjusted EBITDA profitability, which it hopes to achieve by the end of this year. It saw a pretty dramatic shrinking in the adjusted EBITDA loss by 43% to $10.2 million in Q1 2024, compared with just a 5.5% fall in 2023.

This follows from an almost 3x increase in the gross profits, but is also due to a decline of ~13% fall in operating expenses. As a result, the EBITDA levels are down by 48% (see table below).

Market multiples make unconvincing case

While BLNK’s trailing twelve months (“TTM”) price-to-sales ratio at 1.52x is improved since I last checked, when it was at 1.71x, the same can’t be said for the forward P/S. The figure is at 1.89x, a higher than the 1.58x ratio the last time.

Further, its ratios are also higher than those for its peer ChargePoint Holdings (CHPT) at 1.32x and 138x respectively. However, CHPT is in a very different place, with revenue contraction seen in the past two quarters and shrinking gross profits in two of the past three quarters, and a loss in the third.

In any case, CHPT’s performance is cautionary from a sectoral perspective. And coupled with the increase in BLNK’s forward P/E indicates a limited case for the stock.

What next?

This is particularly so going by slowing EV sales growth in the US. The company’s own revenue projections indicate its expectations of a cooling off in growth further into the year, even if the guidance is upgraded

Though, going by last year’s example and its business developments, the guidance may well be upgraded.

That it expects to show the first signs of adjusted EBITDA profitability by the end of the year is encouraging indeed, but even then, the gross margin is expected to soften in the coming quarters from the expansion seen in Q1 2024. Its market multiples don’t entirely indicate a price uptick ahead, and the EV industry as such isn’t exactly creating fireworks at the stock markets either.

The key takeaway here is that while BLNK has plenty of potential, there could be market weakness ahead that can drag the stock down. I’m retaining a Hold on it, until such time that there’s either a surprise in its financial performance or in the EV market.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

—

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• Blink Charging Co. fails to impress with 2024 targets, highlighting struggles in the EV charging station sector.
• The company has limited service revenues and a reliance on volatile product revenue, with limited gross margins hindering growth.
• The stock isn’t appealing with the constant share dilution and lack of revenue growth going forward.

Just as the market was buying into the turnaround story for Blink Charging Co. (NASDAQ:BLNK), the EV charging station company failed to impress with 2024 targets. The whole sector has struggled to make the business models work and Blink Charging reinforced this issue again. My investment thesis remains Neutral on the stock, with the previous shift in the business not strong enough to warrant a Buy rating.

Limited Services Business

With a new CEO in place, Blink Charging made a remarkable turnaround in 2023. The EV charging station company grew revenues by 130% in the year to reach $140.6 million.

Unfortunately, the company ended the year on a sour note and the stock is back to the recent lows. Blink Charging ran into the same issue hitting all of the charging station stocks. The business is too reliant on volatile Product revenue with limited gross margins.

Service revenues only hit $7.9 million, though up 40% from $5.7 million last Q4. Total revenues for the quarter were only $42.7 million, down from $43.4 million in the prior quarter.

The company faces seasonality like any industry with holiday Product sales reduced and less EV driving during cold weather. Despite the dynamic industry with new EVs hitting the road each day, Blink Charging is no longer growing revenues.

The issue is that the company only produced a Q4 ’23 gross profit of $10.6 million. Blink Charging even cut the operating expenses to only $28.7 million, but the company still has a large operating loss, while revenue growth has stalled. This leaves a huge gap to resolve in 2024 without the benefit of much in the way of revenue growth.

The crazy part is that the adjusted EBITDA loss was mostly flat YoY at $14 million. The company nearly doubled revenues YoY in Q4 without any improvement to the loss picture.

Blink Charging had demand for 5,100 chargers in the quarter with 23,347 chargers deployed or sold for 2023. The company has now sold or deployed nearly 90,000 EV chargers, yet the Service revenues are only hitting $7 million per quarter.

Mackenzie apparently projects the U.S. needs 28 million chargers, 7x the 4 million installed today. The problem is that Blink Charging needs more than 25% CAGR through 20230 in order to generate a positive return for shareholders, especially considering the majority of EV chargers are forecast to be Level 2 chargers for homes. The whole industry made a vast mistake of not turning EV chargers into a profit machine due to these companies not really participating in the revenue split from actual charging, mostly done at home.

Growth Stalled

The market has constantly been told that EV charging station demand is off the charts with the need for millions of new chargers. Yet, Blink Charging and other EV charging station companies outside of Tesla (TSLA) SuperChargers regularly struggle to generate material revenues on services and software that include fees for customers using the chargers.

Blink Charging ended 2023 with 2H revenues of $86 million, yet the company only guided to 2024 revenues of $165 to $175 million. The stock market was already slapped with flat revenues during Q4, and the guidance for 2024 suggests sequential growth flatlines all year from the currently annual run rate of around $170 million.

All of the positive goodwill generated by the new CEO during 2023 just evaporated. Blink Charging is back in the penalty box with limited margin of safety, while the company spent the Q4 ’23 earnings call promoting revenue growth in 2024, though the YoY focus doesn’t really address all the financials improving sequentially.

The guidance for 2024 offers up revenues flat with the 2H. All of the revenue growth is effectively due to the 1H’23 quarterly revenues averaging just $22 million before Blink Charging elevated sales to another level and growth stalled again.

Even worse, the company sold 30.9 million shares via the ATM in 2024 to raise $114 million with $88 million worth during Q4 ’23 and another 8.2 million shares for $25 million though February 12 of this year. Management suggested the shares were sold under favorable market conditions, though the average price was in the $3s with.

Blink Charging ended the year with a cash balance of $122 million and raised enough money in Q1 ’24 already to cover cash burn for the quarter. The issue is going forward and whether the company can indeed reach adjusted EBITDA profitable in December to cut off the cash burn considering the general view echoed on the earnings call appears too bullish on the current EV market.

The company reported an average Q4 diluted share count of 63 million with a diluted share count for Q1 of closer to 100 million. The stock has a market cap of just $260 million, at the current price.

Takeaway

The key investor takeaway is that the market wasn’t impressed with Blink Charging Co. guidance for only 20% growth in 2024. The target only amounts to roughly flat sales for the year with the 2H’23 numbers. Blink Charging just vastly diluted shareholders by raising $113 million in new equity when the stock price was relatively cheap and the guidance for reaching adjusted EBITDA positive in December doesn’t even appear logical with the limited sequential growth forecasted this year.

Investors should continue to watch Blink Charging from the sidelines with limited Services revenues to drive the business towards a profitable future.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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• Blink’s business model of selling charging hardware as well as operating its own charging network will allow it to benefit the most from a potential EV demand rebound this year.
• I expect EV demand to reaccelerate this year due to EV tax rebates being offered at the point of sale and NEVI installs picking up this year.
• Return-to-office policies will increase demand for EV charging stations to accommodate returning employees.
• Blink’s prudent cost management since Brendan Jones’ promotion to CEO could help it reach profitability in 2025.
• I believe Blink Charging stock is undervalued at current levels with a price target of $4.6.

2023 hasn’t been kind to EV charging stocks as waning EV demand caused equities in this sector to falter in 2023 as well as the first 2 months of 2024. One of those stocks is Blink Charging Co. (NASDAQ:BLNK) which has seen its shares decline 70% in 2023 and is currently 3.6% down YTD. That said, I believe Blink is fundamentally undervalued at its current share price as I expect it to benefit from a surge in EV charging demand this year for reasons that I’ll explain throughout this article.

Although the expected improvement in the EV industry’s outlook will benefit all charging companies, I believe Blink is the best stock in this sphere given its improving financial performance since promoting Brendan Jones to CEO in May last year. In fact, I expect Blink to reach profitability earlier than its peers ChargePoint Holdings, Inc. (CHPT) and EVgo, Inc. (EVGO), which is why I’m rating it as a buy with a price target of $4.6 per share.

Company Overview

Blink is an EV charging company that manufactures, owns, operates, and provides EV charging equipment and services. This means that Blink has multiple revenue streams since it sells the charging equipment, which is a low-margin business, in a similar fashion to ChargePoint, while also operating its own charging networks, a higher margin business, similar to EVGO. As such, the company combines both worlds, which makes its future outlook extremely bullish in my opinion as EV demand may be poised to reaccelerate in the US this year.

New Policy Will Boost EV Demand

On January 1st, 2024, EV tax rebates became at the point of sale as cash, a price discount, or a down payment. This means that all eligible EV buyers would get an upfront discount of up to $7500 for new EVs and $4000 for used EVs. In simple terms, a $60 thousand new EV immediately becomes $52,500 under the new policy.

In my opinion, this policy change is a game changer since, under the old policy, consumers had to wait until filing their annual tax returns during tax season to receive the tax credit. Therefore, the policy change makes the tax break easier to claim and more accessible to consumers in addition to making EVs cheaper for them. As such, a major concern for car buyers is solved, since according to the 2023 Deloitte Automotive Consumer Study, EVs’ cost was the most cited concern for 52% of new car buyers in the US.

NEVI Installs are a Major Tailwind

Another concern for potential EV buyers is charging infrastructure. A study conducted by Cox Automotive last June found that 32% of consumers who were considering an EV cited a lack of charging stations in their area as a barrier to purchase. Another study conducted by the Energy Policy Institute at the University of Chicago and the Associated Press-NORC Center for Public Affairs Research in April 2023, found that 47% of US adults are unlikely to buy an EV as their next car, with 80% citing a lack of charging stations as a factor.

With charging infrastructure clearly a major obstacle in increasing EV adoption, the ramp-up in opening EV charging stations funded by the NEVI Program comes at a perfect time to stimulate EV demand. While it’s been reported that no charging stations were constructed under the program in early December 2023, according to Associated Builders and Contractors, the first out of more than 500 thousand charging stations funded through the program opened outside Columbus, Ohio in mid-December.

Since then, the opening of new stations has ramped up significantly as the latest NEVI progress update stated that 33 states have released solicitations for the NEVI program, 16 of which are already awarding contracts and installing charging stations. In fact, 2 additional stations were opened in New York and Pennsylvania.

Although NEVI installs are still in their early stages, I expect more stations will open this year, especially as we approach the upcoming presidential election in November. This is a major catalyst for Blink since it is eligible to receive funding under the program. In fact, Blink is already in talks with officials at the DoE, DoT, and state departments of transportation who oversee their state’s NEVI program.

The advantage of this to Blink is that the program prioritizes having DC chargers along the highway corridors since they can charge a car over 80% in less than 45 minutes. However, the convenience of fast chargers comes at a cost since DC charging is 7-10 times more expensive than AC charging with the same performance.

Considering Blink’s business model, the company would be operating any charging stations it opens under the NEVI program, which would lead its service revenues, which have high margins, to increase substantially. As such, Blink would come closer to becoming profitable considering the improvements in its operating costs since Brendan Jones became CEO.

Although Blink is better known for its AC chargers, it’s already increasing its DC charging stations and was even awarded a $12.5 million grant to place 52 fast chargers along key highway corridors in Florida. With that in mind, Blink had 1,435 DC chargers contracted by the end of Q3 2023, a 45% sequential increase from 987 and a 378% increase compared to 300 in Q1 2023.

Return to Office Will Stimulate Charging Demand

Aside from DC chargers, it’s worth noting that AC chargers represent the bigger opportunity in the EV charging scene given that 80% to 90% of charging occurs overnight at home or during the day at work according to DoE estimates. Based on this, the anticipated implementation of return-to-office policies by most companies should stimulate demand for EV charging infrastructure. A survey conducted by Resume Builder found that 9 out of 10 companies with office space will have employees return to the office by the end of 2024.

The sheer amount of companies returning to office should lead to a spike in demand for EV charging equipment. This would be beneficial to both ChargePoint and Blink considering they are the 2 largest sellers of EV chargers. As is, a study conducted by ChargePoint found that 69% of EV drivers charge their vehicles at work, which highlights the significance of return-to-office policies for the EV charging sector.

A Clear Path to Profitability

Having discussed the potential tailwinds that could boost EV charging demand this year, I believe Blink is the more attractive stock in that industry compared to its peers ChargePoint and EVgo. This is mainly due to Blink’s superior margins and cost structure.

Since Q1 2022, Blink has had better gross margins compared to its peers as shown in the table below. It is worth noting that ChargePoint’s gross margins for Q2 and Q3 2023 exclude non-cash impairment charges of $28 million and $42 million respectively.

Click to enlarge

*Author compilation from each company’s quarterly filings.

The reason why Blink boasts superior margins compared to its peers is a main result of its business model since it sells the charging hardware and operates its own charging network which mainly features AC charging stations. As a result, the high margins of the service business offset the low margins of the hardware business. The discrepancy in the margins of both segments can be shown in the following graph.

In comparison, ChargePoint sells charging equipment and generates additional revenues from the maintenance of the equipment. However, when looking at the margins of the hardware segments of both companies, Blink has substantially higher-margins as shown in the table below.

Click to enlarge

*Author compilation from each company’s quarterly filings.

Blink’s business model also provides it with an edge over EVgo since the majority of its charging stations are AC stations, while EVgo’s network is exclusive to DC chargers. This edge is mainly due to DC chargers having higher installation and grid connection costs than their AC counterparts since they deliver more power to EVs, which requires more power from the grid. As such, Blink’s service segment has substantially higher margins than EVgo as shown in the table below.

Click to enlarge

*Author compilation from each company’s quarterly filings.

In my opinion, Blink’s solid margins could enable it to reach profitability earlier than its peers if its cost structure remains similar to Q3 2023. During that quarter, Blink’s operating expenses were flat YoY at $29.2 million, excluding a $94.2 million non-cash impairment charge, leading to a 17% YoY improvement in adjusted EBITDA. With that in mind, Blink’s management shared in the Q3 earnings call that they expect this trend to continue with more sales volume that would lead to better margins as well as realizing more cost savings through the improvement plan.

Given management’s forecast of reaching a positive adjusted EBITDA run rate by December 2024 in the Q3 earnings call, I expect Blink to reach profitability in 2025, especially if it’s selected to install stations under the NEVI program. I believe that is the case since the company showed impressive control over its operating costs in Q3 2023.

Blink’s operating margin during that quarter was -38% compared to -101.35% for ChargePoint and -103.60% for EVgo. This was a direct result of the company reducing its costs as a percentage of revenue as shown in the following table.

Meanwhile, ChargePoint and EVgo’s operating costs have been increasing as a percentage of revenue, which is problematic for ChargePoint specifically considering its declining sales.

Valuation

From a valuation standpoint, I believe Blink is undervalued at current levels considering the aforementioned EV charging tailwinds and its path to profitability. Currently, the company is trading at a forward EV/sales multiple of 1.27, lower than its peers ChargePoint at 1.58 and EVgo at 5.07. Blink’s EV/sales multiple is also lower than the sector median of 1.81, indicating a 30.13% undervaluation. Based on this, my price target for Blink is $4.6, representing a 42.4% upside from the current share price of $3.23.

Risks

The biggest risk to my bullish thesis on Blink is dilution. Over the years, Blink has resorted to dilutive capital raises to fund its operations as it’s yet to reach profitability. This has caused significant dilution to shareholders as shown in the following table.

Click to enlarge

*Author compilation from quarterly filings.

With that in mind, Blink has an ongoing at-the-market offering where it can issue and sell up to $250 million. As of the end of Q3 2023, the company sold more than 6 million shares under the program representing gross proceeds of $36.5 million, per the Q3 report. As such, the company may raise an additional $213.4 million which would be equivalent to nearly 66.1 million new shares at the current share price of $3.23. This means that if Blink raises the maximum amount under the ATM program, its outstanding shares would nearly double.

Conclusion

In summary, I expect demand for EV charging infrastructure to increase this year due to EV tax rebates becoming available at the point of sale, the ramp-up in NEVI installs, and return-to-office policies. That said, I’m especially bullish on Blink given its impressive margins and cost structure, which gives it a clear path to profitability in 2025 in my opinion. As such, I’m rating Blink as a buy with a price target of $4.6, representing a 42.4% upside from current levels.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Blink Charging: EV Tailwinds Offer A Path To Profitability In 2025 appeared first on Up2info.com.

• Blink Charging stock surged 32% after posting better-than-expected preliminary fiscal 2023 fourth-quarter earnings. Revenue is set for 86% year-over-year growth to $42 million.
• BLNK’s low valuation compared to its historical average could potentially set bulls up for medium-term outperformance if the Fed cuts rates.
• Interest rate cuts and a dip in inflation could help reverse the slowdown in EV sales and negative investor sentiment toward the industry.

Blink Charging Overview

Blink Charging’s (NASDAQ:BLNK) 32% intraday surge after it posted preliminary fiscal 2023 fourth-quarter earnings that surprised consensus to the upside possibly reflects two factors. The first is that EV sentiment has been driven too low, despite the continued strength of new EV uptake in the US and beyond. The other is that a 19,748,932 share short interest, nearly 33% of its diluted weighted average number of common shares outstanding as of its last reported quarter, got caught in a squeeze.

The conditions for a short squeeze had been building up following a more than 65% dip in the common shares over the last 1 year. BLNK is now comparatively cheap when compared to its historical average. You can pick up commons for roughly 1.7x sales, near the lowest level in more than half a decade, despite the continued but flagging momentum of EV sales in its core developed market.

Critically, the downward reset of expectations around the rapid uptake of EVs will continue to form a headwind against broader sentiment towards EV charging tickers, but BLNK’s low comparative valuation could set the ticker up for medium-term outperformance. When I last covered the ticker, I flagged collapsing investor sentiment and liquidity in the sector. The situation has worsened since then with Tesla (TSLA), Lucid Motors (LCID), Rivian (RIVN), and Fisker (FSR) amongst others giving up significant value since November of 2023.

Preliminary Earnings, BLNK Stock Valuation, And Flagging EV Sales

BLNK will likely report its full fourth-quarter and full-year 2023 earnings on the last week of February or early March, but has yet to provide a date. The company is set to report revenue of $42 million, up 86% from $22.6 million in its year-ago comp and significantly above consensus of $34.4 million. Revenue for the full year is set to notch $140 million at minimum, ahead of a prior range for full-year revenue of $128 million to $133 million. This demand for its EV charging products and services reflects the sustained pull-up of new EVs on the road.

According to the US Department of Energy, 2023 saw the sale of more than 1.4 million EVs in the US, a 50% increase over its year-ago comp. There are now more than four million new EVs on the road since 2020 with EV sales as a percent of overall US vehicle sales reaching a new high just north of 9% in 2023. However, momentum has started to slow down, with this percentage materially dropping towards the end of 2023. Elon Musk, Tesla’s CEO, has come out to say that 2024 will mean lower delivery growth for Tesla, with other EV upstarts like Lucid and Fisker recently underperforming on their delivery targets.

The fear here is that the period of blistering growth is behind the industry, with the easy wins in terms of new EV drivers already converted. Bears argue that the industry will struggle to expand its market share until new EV models are released that address consumer concerns around range, costs, and charging times. EV range anxiety remains a pertinent barrier and when aggregated with higher base prices compared to internal combustion engine vehicles means there will always be a ceiling on new uptake. The situation for the EV manufacturers is deteriorating with poor sales of upstarts like Fisker whose stock has now dropped below the minimum required for continued NASDAQ listing. Ford (F) has also pared back on its EV investments on the back of material losses in the segment.

Fed To The Rescue?

The huge uptick in days of EV inventory at US automobile dealerships also reflects flagging consumer adoption of EVs. This now sits at just above 75 days, up from under 20 days roughly a year prior. EVs have in one year seen both consumer and investor sentiment get entirely inverted to the negative. Higher interest rates and a high cost of living have played a significant role in this, with the cost of financing new car purchases through debt rising to match a Fed funds rate currently at a 22-year high of 5.25% to 5.50%. Market expectations are for a drop to 4.25% to 4.50% exiting 2024.

A reversal of this in aggregate with inflation rates normalizing will likely help deliver a boost to new EV sales. For BLNK, this is critical in seeing a reversal of torrid market sentiment towards its stock. To be clear, the market wants growth, and BLNK functions as a pick-and-shovel play on the growth of EVs in the next decade and beyond. A recovery of its multiple is tethered at the hip to a full recovery in EV sales momentum. The intraday rally on the release of preliminary fourth-quarter earnings foreshadows for bears the potential upside on a ramp of this momentum, for bulls it’s a reason to maintain a hold on the common shares.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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• Blink Charging Co. has seen a rally in its stock after billionaire investor Ken Griffin bought shares, boosting interest in the company.
• The EV charging station business model is struggling due to low-margin product sales and high expense bases.
• While Blink has made improvements in its business model, it is still far from being profitable and faces major demand issues in the U.S. EV sector.

After a disastrous few years, Blink Charging Co. (NASDAQ:BLNK) started rallying in the last couple of months. The EV charging station company has seen the business model under pressure, but famed investor Ken Griffin bought shares, boosting the interest in the stock. My investment thesis is more Neutral on the stock, though Blink could rally in the short term with the positive trends in the business.

Tough Business Model

The EV charging station business models continue struggling due to focuses on trying to ramp up high margin services when EV owners and fleet operators utilize the charging station networks. The problem for Blink and other operators is that the vast majority of the revenues accrue from low-margin product sales, while expense bases soar.

In essence, the SG&A operating model is built on the gross revenues and not the much lower gross profits. Blink has seen a vast shift in this business model since Brendan Jones took over as CEO back in May

The EV charging station company recently reported Q3’23 revenues soared 152%, but the company continued to report large losses. The vast improvements in the business came due to a huge boost in equipment sales.

The key Service revenues were only $6.7 million in the quarter and have shown limited relative growth during 2023 after starting off at $4.8 million in the March quarter. Service revenues are up 119% in the quarter, but the base was so small in 2022.

Blink only has a 30% gross margin target, with a goal of just reaching adjusted EBITDA profits by December 2024. The Q3’23 adjusted EBITDA loss was $11.7 million, down from $17.6 million last year.

The shocking shift in the business model is that the new CEO was able to optimize costs to the point where Blink key Q3 operating expenses were in the $29 million range, flat YoY.

The problem here is that the U.S. EV market isn’t growing as expected outside of Tesla’s (TSLA) Supercharger network. EV monthly sales in the U.S. peaked months ago and is no longer showing any sequential growth, while the YoY metrics still show 42% growth in November.

Auto dealers are even facing over 60 days to sell an EV on their lots, while gas vehicles are just above 40 days. Blink could face a path to EBITDA profits far more complicated than thought when the company provided guidance after the Q3’23 earnings report.

Lurking Investor

Ken Griffin’s Citadel hedge fund has taken a small passive stake in Blink. According to an SEC filing, the hedge fund owns a combined 610K shares for a small 0.9% stake.

The move is interesting considering the tough business model and the limited cash balance of $66 million. Though, Blink Charging only has a market cap of $250 million.

If the company has finally figured out the financials, the stock could factor into a long-term investment thesis due to the ultimate shift to EVs. The U.S. is only selling EVs at an 8.1% clip of new vehicles sales, compared to the rest of the world at double to triple the pace of the U.S.

The problem with all of the EV charging station business models is massive cash burn while awaiting for EV sales to turn material to drive utilization. A bleeding edge model doesn’t work very well for shareholders, getting massively diluted in the process.

Blink has a large ATM the company could utilize, so obtaining additional funds isn’t a major risk. The biggest issue is dilution from ongoing cash burn. Despite all of the improvements in the business model over the last year, gross margins in the 30% range don’t provide a quick boost to gross profits.

Takeaway

The key investor takeaway is that Blink Charging has made a shocking shift in the business model. The company has been able to more than double revenue while restraining costs. Unfortunately, the Blink Charging Co. business is still far away from being profitable and the U.S. EV sector faces major demand issues. The investment thesis is no longer Bearish, but the business dynamics still make being Bullish too difficult.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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The post Blink Charging: Surprising Shift (Rating Upgrade) appeared first on Up2info.com.

• ChargePoint and Blink Charging have collapsed over the last year as investor sentiment towards EV economy stocks wanes.
• Both companies are losing money every quarter and have been heavily dependent on selling new equity to bridge their liquidity gap.
• Near-term dilution is set to continue with the current low multiple of both tickers set to accentuate the impact of new equity issues.

The last year for electric vehicle stocks has been disastrous. Lordstown Motors (RIDEQ) and Proterra (OTCPK:PTRAQ) have filed for Chapter 11 bankruptcy and a plethora of tickers from Canoo (GOEV), Arrival (ARVL), and Faraday Future (FFIE) all teeter on the brink of collapse as their liquidity base gets eroded by consecutive quarters of net losses and free cash burn. Only industry leader Tesla (TSLA) has come out unscathed. To state the situation was not meant to end up this way would be an understatement. EVs remain the future of transportation but the industry is seemingly collapsing. Where does this leave charging stocks ChargePoint (NYSE:CHPT) and Blink Charging (NASDAQ:BLNK)? CHPT is down 84% over the last year with BLNK down 72%.

The investment pitch for both EV charging tickers is built on the back of the increasing adoption of EVs in the US and other developed markets. The US Department of Energy estimates that between $53 billion to $127 billion of capital investment is required to build out the charging infrastructure needed to support a scenario where there are 33 million EVs on US roads by 2030. To be clear, EVs and chargers have a symbiotic relationship and the long-term adoption of EVs needs to be mirrored by the growth of charging infrastructure. Hence, both tickers formed simple pick-and-shovel plays on a broader macro trend set to play out over the decade and beyond.

EV sales in the US came in at 313,086 in the third quarter of calendar 2023, setting a volume record and showing material growth of 50% over its year-ago comp. Sales are set to surpass one million for the first time in November. Critically, the retrenchment of their price-to-sales multiples forms the most pressing headwind. Euphoria, hype, and ravenous animal spirits defined the investor capital in their common shares in early 2021. The Fed’s almost 2-year fight with inflation has made this capital more restive and averse to risk. BLNK is now changing hands for a 1.9x price-to-sales multiple versus 1.3x for CHPT, both down markedly from 2021. With interest rates remaining higher for longer likely to keep this new zeitgeist that has led to the collapse of EV stocks in place for much of calendar 2024, does CHPT or BLNK form a better buy? CHPT currently has the edge for being cheaper.

Liquidity, Free Cash Burn, And Cash Runway

Campbell, California-based CHPT is the larger company with a $730 million market cap versus $260 million for BLNK. Existing liquidity is key here with equity capital markets being more restrictive for fundraising and debt being more expensive with a Fed funds rate currently at a 22-year high. CHPT held cash and equivalents of $233 million at the end of its last reported fiscal 2023 quarter. This was down from $471 million in the year-ago period and came as CHPT continues to own the largest network of Level 2 chargers in North America with a 50% market share.

This is a strong moat as 90% of future US chargers are set to be Level 2s. CHPT has since been able to raise $175 million through the sale of its common stock and an additional $57 million from its at-the-market offering facility. The company’s cash position, including restricted cash, now sits at roughly $397 million at the end of October 2023. This liquidity position represents 47% of CHPT’s market cap and means just over four quarters of cash runway against a trailing 12-month free cash burn of $344 million from the end of July 2023.

BLNK’s cash and equivalents stood at $66.7 million at the end of its most recent quarter. This was up from $57 million in the year-ago period but down sequentially as the company recorded a free cash burn of $13.7 million. Miami Beach, Florida-based BLNK has also been highly dependent on new equity sales to plug its liquidity gap against a trailing 12-month free cash burn of $112 million. BLNK has seen its average diluted shares outstanding grow 92% over the last three years with the company’s current liquidity position now providing it with around five quarters of cash runway against its annualized free cash burn from its last reported quarter. This cash runway would dramatically slim to just over two quarters against its trailing 12-month free cash burn. The company also has an at-the-market offering facility to raise $230 million in funds.

Dilution, Margins, And Revenue Guidance As Sentiment Set For Recovery

CHPT has seen its shares outstanding grow by 58% since the end of April 2021 after it completed its business combination with blank check company Switchback Energy Acquisition Corporation. This dilution for both tickers is set to ramp up on the back of their cheaper multiples and lower stock prices. It’s a lot easier to raise $10 million in funds when trading at a 300x price-to-sales multiple versus 1.9x. BLNK’s current ATM facility is 87% of its current market cap. The common shares of both firms did catch a bid on broad market enthusiasm that the Fed is set to pivot to a more dovish stance next year on the back of two consecutive interest rate pauses. This would represent some risk for what’s currently a 30% short interest in the shares of BLNK and a 21% short interest in CHPT’s shares.

CHPT fell 35% in intraday trading last week after the pre-release of its fiscal 2024 third-quarter earnings. The company expects third-quarter revenue of $108 million to $113 million, down from a prior range of $150 million to $165 million. The company’s prior second-quarter GAAP gross margins dipped markedly to 0.75% following a $28 million, around 19 margin point impairment to the cost of goods sold taken to address higher supply chain component costs and supply overruns for their first generation DC charging products. There was another 3 margin point headwind from selling these DC charging products at the pre-impairment cost structure. BLNK reported a gross profit margin of 29.4% for its last reported quarter. The company also raised its fiscal 2023 revenue guidance range to $128 million to $133 million from a prior range of $110 million to $120 million.

The most important chart for both tickers is from the 30-Day Fed Funds futures pricing data with a recovery of risk-off sentiment set to improve if the Fed decisively ends its battle with inflation early next year. The current price-to-sales multiple for both companies could stand to recover against the current revenue base for both firms. Both CHPT and BLNK have been aggressive in tapping their shares and are set to continue to dilute shareholders. Hence, I’m not a fan of either ticker even with EV adoption set to continue on an upward trajectory.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post ChargePoint Or Blink Charging? Electric Vehicle Stocks And Liquidity Are Collapsing appeared first on Up2info.com.