Shares of electric vehicle (EV) charging equipment provider, Blink Charging (BLNK -3.11%), have zoomed 1790% year-to-date as of this writing. A growing enthusiasm for electric vehicles combined with a growth in the number of Blink's charging stations during the year made investors exuberant about the company's prospects. But, after its astronomical rise, is the stock a buy for 2021?
Blink's growth in 2020
Blink Charging provides EV charging equipment and owns and operates charging stations for electric vehicles. In some cases, the company owns the stations, where it undertakes everything from installation to maintenance and keeps substantially all the revenue generated. In other cases, Blink only operates the stations, including things such as monitoring and management of the stations, payments processing etc., through its cloud-based system. The installation cost is borne by property owners, who keep a share of the revenue generated.
Image source: Getty Images.
At the end of the third quarter, Blink Charging owned or operated 15,716 charging stations compared to 14,778 stations it had at the end of 2019. The company's revenue in the first nine months of 2020 rose 84% year-over-year. Though that looks promising, it is worth noting that it was over a low base of just $2.1 million of revenue in the first nine months of 2019. The company's net loss in Q3 stood at $3.9 million and for the first nine months, it reported a loss of $9.9 million.
BLNK Revenue (Quarterly) data by YCharts
Blink Charging currently funds its operations through debt and equity financing. The company hasn't achieved profitability yet and it also doesn't seem to have a plan or target towards that objective yet.
Growth potential
Considering the growth of EVs, the need for EV charging equipment and network looks obvious. According to BloombergNEF, there could be 116 million EVs on road by 2030. Moreover, it expects more than half of new car sales to be EV by 2040. With more electric vehicles on road, Blink Charging gets to benefit both from new equipment sales as well as from recurring revenues from the stations it owns. However, the growth path isn't really as rosy as the buoyant investors seem to believe.
Competitive market
The EV charging equipment market is highly competitive. To cater to the needs of cost-conscious customers, there are several small companies that offer basic chargers for home as well as commercial locations. Further, there are companies such as ChargePoint and EVgo that compete directly with Blink Charging. ChargePoint can potentially be a significant competitor for Blink, considering its plans to go public via special-purpose acquisition company (SPAC) Switchback Energy Acquisition.
Finally, there could be potential competition from the likes of Tesla, which currently offers charging services only to Tesla vehicles. Competitors in this category could have substantially more financial resources than Blink Charging.
Overall, the market for EV charging equipment is expected to be highly commoditized, with thin margins. That makes Blink Charging's road towards profitability thorny.
Blink Charging in 2021
Blink Charging could continue adding stations to its network in 2021. However, the stock can continue to remain volatile, as in the past. The stock's spectacular rise in 2020 is linked more to investor enthusiasm and momentum than the company's fundamentals. It will likely remain so in 2021 too.
Given the potential market size, as well as Blink Charging's growth in the number of stations so far, the company's growth story has at least some chance of succeeding. However, at a price-to-sales ratio of 220 times, it isn't exactly a great time to enter into the stock.
For that reason, I would watch this stock only from the sidelines till the time the company comes with a concrete plan towards profitability or the stock price falls more in-line with its current operational performance.
