Blink Charging: Company’s Future Hinges on Slow EV Growth (NASDAQ:BLNK)

Entry

As one of the leading charging station networks in terms of the number of stations in operation, Blink Charging Co. (NASDAQ:BLNK) is constantly developing charging products to accelerate the growth of electric vehicle adoption. Blink currently owns 90,000 chargers worldwide, is a significant player with high growth potential, given the growing popularity of zero-emissions and electric vehicle manufacturers.

Most importantly, CEO Brendan Jones’ Q2 2024 announcement confirms that the board is committed to positioning Blink for long-term growth and shareholder value. The company remains committed to driving the energy transition and expanding charging points worldwide with its continued innovative charging technology.

However, the EV industry, which the charging sector depends on, is also facing many problems, such as slower sales and infrastructure issues. Therefore, in this analysis, we will delve into the various risks for the company and consider that will continue to impact Blink over the next few years. That’s why we rate Blink a Hold.

Latest earnings update: Q2 2024

The company posted a number of positive results, but there were no key, strong positives as shares fell 7.5% to $2.34 immediately following the Q2 2024 report.

Most analysts’ expectations were missed, with revenue coming in at $33.26 million, a 14.6% miss on analysts’ forecast of $38.97 million.

EPS (non-GAAP) came in at -$0.18 above analysts’ forecast of -$0.13, implying a loss of $0.67 per share. Looking at Q2 2024 results, BLNK remains a solid business. The operating margin expansion shows that the company is improving efficiency and is on track to fully recovering with the currency. However, as the title of the analysis suggests, the company continues to face some industry headwinds.

Unrivaled supply of charging points and high sales of electric vehicles

According to McKinsey research, EV sales will surpass ten million units in 2022, up 50% from 2021. However, the growth in EV sales is not being equally offset by the installation of private and public chargers. By 2022, the United States will have 2.6 million charging ports, but the growth in EV sales each year is driving an estimated demand for 9.5 million ports by 2025 and 28.0 million chargers by 2030. Demand for charging points continues to grow, but charging ports are slowing consumer adoption due to convenience issues such as range and availability. The inconvenience is causing reduced demand for EVs, which has a side effect on Blink stock, which is a decline in demand for charging stations.

Inconvenience caused by uneven charging

As a result, consumer demand for electric vehicles will be lower

Charger providers like Blink have failed to provide convenience in terms of charger availability and range. EV users do not experience similar convenience as ICE users. Consider a study conducted by McKinsey, where respondents prefer to buy an alternative traditional ICE car before switching to EVs. 40% of respondents believe that charging ports are the main barrier to buying an EV because they are not equivalent to gas station installations. Therefore, the stability and growth of Blink chargers depend on the company’s ability to meet customer expectations.

29% of electric vehicle owners are actively returning to combustion vehicles due to difficulties with charging at ports

Charging port inconveniences are causing consumers to be reluctant to switch to electric vehicles

Ultimately, manufacturers are cutting back on production

Consumer demand is falling due to inconvenient charging ports as demand for electric vehicles continues to decline. However, sales are expected to increase in the future. Automakers such as General Motors, Mercedes-Benz, Jaguar, Aston Martin, Land Rover, and Volkswagen have begun to scale back and delay their EV production plans. Even Tesla, the US leader in EV production and charging points, through its CEO Elon Musk, has announced plans to slow down its growth rate. While this had a positive impact on Blink charging stocks, it has proven to slow its usefulness in the long run.

Competitive Landscape

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

Blink faces competition from rivals like Tesla, whose CEO, Elon Musk, has announced plans to invest $500 million in new Superchargers. Tesla, Inc. (TSLA) is a strong competitor to Blink because it can produce the most efficient and fast charging points.

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

Blink’s competitive advantage is its 60kW–360kW DC fast chargers designed as an all-in-one charging point for serviceability and speed. However, in June 2023, Blink announced its intention to make 240kW fast chargers available to most Blink charger users. This shows that Blink is facing a competitive disadvantage in the market.

BLNK’s Future Strategic Positioning

Blink is boosting investor confidence following its strategic decision to acquire SemaConnect, an EV infrastructure company that produces EV charging infrastructure in Maryland. By scaling its network, Blink now produces, owns and operates its charging points, a positive sign for investors.

The Consequences of Owning an Operational Network Instead of Selling It

Blink has gained an advantage in acquiring SemaConnet, which is its R&D arm for EV charger manufacturing and service. This is an opportunity for Blink to accelerate and fully control the supply chain to accelerate EV adoption. This is a strategic plan to scale production of 50,000 chargers per year from the current production of 10,000 EV chargers at reduced costs. With the announcement in Q2 2024, Blink’s report of charging points sold, deployed and contracted was 4,106, indicating a risk of not achieving the forecasted 50,000 charging points per year.

Future demand for charging ports

The transition to electric mobility is gaining slow pace, with minimal research on how battery-powered vehicles will overtake ICE convenience. EV forecast sends a warning to Blink investors with 1% EVs on US roads and 9% expected by 2040. This is a hint that Blink charging investors may not see profits anytime soon. With Q2 2024 announced, Blink’s report of charging points sold, deployed and contracted to 4,106 points to the risk of not reaching the forecasted 50,000 charging points per year.

When investing in Blink, investors should watch for key developments in the future, such as significant growth in charging infrastructure. With 4,106 charging point installations, this is an opportunity for investors to earn more. Significant charging point installations and cost reductions will position Blink for steady growth in the transition to electric vehicles.

Quotation

In terms of valuation multiples, all the listed companies have similar multiples and trends – P/S multiple has bottomed out at 1.5x – 1.6x. I expect this multiple to remain relatively flat as the sector will struggle with the EV/ICE debate and trend over the next 2-3 years, especially since the economy is in a downtrend and EVs are generally more expensive.

Despite Blink increasing its revenue by 130% in 2023 to $140.6 million, the stock is still at record lows. Blink’s stock is responding to a myriad of events, including falling product sales in cold weather when EV usage is low and an overreliance on revenue from certain products. The consensus for revenue growth over the next three years is generally 20%, which translates to about $170 million and $200 million in revenue in 2024 and 2025, respectively.

Therefore, the target price based on the comparative multiple and 2024 revenue forecast is in the range of $2.3-$2.4, which is a “hold” recommendation in my case.

Investment risk

• Intense Competition: Electric vehicle charging stations face competition from alternative fuels, rapidly evolving chargers, ever-changing technologies and new market entrants. This competition threatens Blinks’ stock performance. As a result, Blink will need to do more research and development on charging technology.
• Technological and regulatory revolution: Advances such as Tesla’s fast-charging technology pose significant risks to Blink charging points. The most innovative technologies could replace current charging solutions, rendering Blink charging points obsolete. In addition, the government is developing regulations to maintain industry standards.
• Demand dependence on the EV industry: demand for EVs sold determines the capacity of charging points. This means that over-reliance on the EV market poses significant risks for investors.