Blink Charging Has a Huge Opportunity, But It Has a Significant Weakness and a Red Flag

With demand for electrical-vehicle (EV) chargers set to soar in coming years and Blink Charging (NASDAQ:BLNK) stock trading at a relatively reasonable market capitalization, the shares could rally over the longer term.

a blink charging station
Source: David Tonelson/Shutterstock.com

The company does, however, have one important red flag and a significant weakness which investors should weigh.

Soaring Demand for Chargers

Amid rapidly increasing adoption of EVs, demand for chargers will likely increase rapidly in the coming years. In a  note to investors on Sept. 24, Morgan Stanley analyst Adam Jonas  predicted that EV use would increase “at a 20% {compund annual growth rate} through 2040.”

Jonas also noted that California Governor Gavin Newsom recently issued an executive order making all gasoline-powered cars and pickup trucks illegal as of 2035. According to the analyst, the state on its own has the fifth largest GDP in the world. This makes Newsom’s decision important for the EV sector.

Moreover, in a previous article on Blink’s larger rival, ChargePoint Inc.,  I noted that “According to one forecast, U.S. EV sales are expected to soar from 383,000 in 2019 to 2.35 million in 2027.”

Of course, many owners of those EVs would, at times, like the convenience of charging their vehicles at stations that are available to the general public. For example, during  road trips, public charging stations would, of course, be quite convenient. And for those who EV owners live in apartment buildings, public charging stations are a necessity, since an automobile cannot be brought into an apartment.

Indeed, earlier this month, Blink announced that it had  placed 40 of its chargers in a single apartment building in Los Angeles. That’s an indication of how lucrative the apartment-building market could eventually become for Blink.

And, as I pointed out in my article on ChargePoint, increased competition for Tesla (NASDAQ:TSLA) and faster chargers should also lift demand for public EV chargers in coming years.

The Margin Issue and a Red Flag

A Seeking Alpha columnist recently warned that the company’s margins are negative, indicating that it may never be profitable. But in actuality, Blink’s gross margins have been positive this year, coming in between 10% and 20%. That suggests that, as the company’s sales climb, its overall profit will increase, assuming that its marketing and administrative costs do not jump dramatically.

Additionally, as demand for public chargers climb, Blink should be able to meaningfully increase its prices.

But the Seeking Alpha columnist did bring up a lawsuit against Blink Charging which alleges that it “vastly overstate[d] the size, functionality, usage, and economic potential” of the company’s chargers. Specifically, the plaintiffs contend that “the majority of Blink’s stations are damaged, neglected, or non-functional,” according to the author. Blink has denied exaggerating the size of its charger network.

The lawsuit may be frivolous, but it could very well have some merit. If it’s true that many of Blink’s stations are defective,  that of course reflects very badly on the company. Even worse, to the extent that Blink misrepresented the condition of its charging network. It may not be trustworthy going forward.

And finally, the Seeking Alpha columnist pointed out that Blink has very little cash. Indeed, according to Yahoo Finance, it had only $4 million of cash as of the end of the second quarter. Although its debt, which stood at just $1 million as of the end of Q2, is very low,  it may have to, given its negative cash flow, issue more shares of BLNK stock in the medium term to stay afloat. When companies issue new stock, their stock prices tend to drop.

The Bottom Line on BLNK Stock

Blink has a big opportunity. And since the market capitalization of BLNK stock is only $273 million, the shares can rise dramatically if the company executes well.

But in light of the accusations made in the lawsuit against the company and its small amount of cash, I think that investors are much better off buying Switchback Energy (NYSE:SBE) stock, which is slated to be taken over by ChargePoint towards the end of 2020.

In my research, I did not come across any major weaknesses or red flags involving ChargePoint.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.


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