Not all revolutions go up in a straight line and the generational shift from gas and diesel-powered vehicles to EVs is no different. The inherent faltering of the revolution has come on the back of the total collapse of the poster boys of the pandemic-era go-public EV surge. The year-to-date performance of the common shares for Lucid Group (LCID), Fisker (FSR), and Arrival (ARVL) have all been torrid with market caps coming to trade at a small fraction of their previous highs. Against such a material and dramatic collapse it is easy to come to the conclusion that the whole transition was nothing but hype. Perhaps one built on an era of cheap money from low Fed fund rates and government stimulus payments.
But it would be wrong to assess the collapse of sentiment on EV companies and related charging companies as an end to the EV revolution. There has to be a separation of common shares and the underlying growth of EV sales. The former had moved deep into bubble territory at previous highs and was unsustainable even under the most bullish scenarios for long-run EV adoption.
Indeed, my inaugural coverage of Blink (NASDAQ:BLNK) described the company’s valuation as egregious. Longs had too rapidly and non-prudently bid up its common shares on a true but too pervasive narrative that EVs were the future and critical enablers like Blink and other charging infrastructure companies and battery manufacturers faced parabolic growth.
The world demand for EVs is growing fast and Blink is making overtures to establish a global footprint. Ten years ago in 2012, just 120,000 EVs were sold globally. Last year saw this sales figure realized on a weekly basis with 10% of all cars sold in 2021 being electric, 4x the market share in 2019 with gas and diesel-powered vehicle sales flatlining in several developed nations. The shift towards EVs is still in a relatively early stage in the United States with around just 1% of all vehicles on roads currently electric. This number is set to materially change in the decade ahead. Globally, EVs are forecasted to grow to at least 26.8 million by 2030, up from 6.6 million in 2021.
Blink last reported earnings for its fiscal 2022 second quarter saw the company realize revenue of $11.5 million, an increase of 163.5% from the year-ago quarter and a beat of $1.78 million on consensus estimates. This was driven by a 154% increase in service revenues to $2.2 million as 5,631 charging stations were contracted, deployed, or sold during the quarter. This was an increase of 73% against the year-ago quarter.
Gross profit margin during the quarter at 22.6% was up sequentially by 321 basis points to help Blink realize a gross profit of $2.6 million. This was up versus $1.1 million in the year-ago quarter.
However, the company’s command of confidence in its ability to scale is being directly challenged by rising net losses and operational cash burn. The former grew by 67.4% year-over-year to reach $22.62 million whilst the latter grew by 58% to reach $19.6 million. This meant cash and equivalents declined to reach $85.14 million exiting the quarter.
Whilst I’d expect Blink to still be unprofitable due to expansion plans on the back of new partnerships from Guam to Jersey City, the rising rate of burn in proportion to revenue growth provides a reason for pause. The company’s cash position is being eroded and the conditions to raise money are in their worst state in years with interest rates rising to new highs and stock market valuations languishing at lows.
Valuations at the previous highs had gotten far ahead of the adoption curve with pre-revenue Lucid at one point reaching a valuation larger than General Motors (GM) and Ford (F). Hence, rather than the fundamental EV revolution being stalled, what we have seen year-to-date is a return to basic fundamental driven investing. Hype, euphoria, and buoyant animal spirit-driven momentum have rightly given way to financials.
The secular shift to EVs is now fully embedded in the post-pandemic economic zeitgeist of most developed nations racing to combat anthropogenic climate change. And with the IRA aiming to create the conditions for 50% of all new vehicles sold to be EVs or plug-in hybrid electric models by 2030, the world ahead of Blink is huge.
EVs have moved on from their esoteric phase and are heading for mainstream adoption. So whilst only around 1% of all cars on US roads are electric, parabolic sales in the years ahead will see this number change quickly to expand Blink’s total addressable market and revenue ramp. But with the company’s price-to-forward sales ratio at an expensive 13.34x, shares are still to be avoided.
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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.
Blink Charging Stock: EV Revolution Is Only Just Beginning (NASDAQ:BLNK) – Seeking Alpha