Blink Charging Stock: Huge Downside Risk For Overvalued EV Company (NASDAQ:BLNK)

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Summary

Blink Charging operates over 23,000+ charging stations across North America, Europe, and the Middle East.
The EV charging boom has caused BLNK stock to trade at an incredibly high P/S ratio and shares are grossly overvalued.
Blink has a bright future but investors should approach with caution and wait for a cheaper stock price before entering a long position.

Blink Charging (NASDAQ:BLNK) is one of America's hottest EV charging companies with over 23,000 charging stations deployed across North America, Europe, and the Middle East.

The company has a growing member base of over 180,000 and seeks to continue its aggressive growth as EV adoption ramps up.

While I like the growth prospects for Blink Charging, investors should wait to invest in Blink Charging stock because it's grossly overvalued at its current price.

EV charging stocks peaked in early February and there could be a lot more downside risk in the short term.

Source: Ycharts.com

Blink has an amazing future ahead but I think you can wait to purchase BLNK shares at a much better price in the future.

Blink's Business Model

Blink Charging deploys self-owned EV charging stations and generates revenue by charging EVs, selling EV charging hardware, providing network connectivity, payment processing, and advertising.

The company makes money from its own charging stations using a vertical integration strategy unlike Chargepoint (CHPT) that generates most of its revenue through 3rd party sales and software subscriptions.

Blink offers Level 2 chargers for home use and DC fast charging units for commercial use.

Source: BlinkCharging.com

Things are looking bright for Blink and the company has grown revenue a lot of the last few quarters.

Blink should generate around $5 million in annual revenue during 2020 (almost up 100% from $2.8 million in 2019). During Q3 2020, the company sold, deployed, or acquired 668 charging stations across 25 states.

Blink acquired BlueLA Carsharing and its 200 EV charging stations located in downtown Los Angeles, CA as well.

Blink founder and CEO Michael Farkas remains extremely bullish on growth in the EV industry but my biggest issue with Blink charging stock is the current valuation.

Blink Charging Stock is Overvalued at These Current Levels

I love the long term bullish story for Blink Charging but it's hard to buy BLNK stock at such inflated levels.

Blink trades at a P/S ratio nearly 200x, which makes it one of the most overvalued stocks I've come across.

Source: Ycharts.com

It's insane to see a company with only around $5 million in annual revenue trade at a $1 billion+ market cap.

The EV boom caused EV charging stocks like Blink Charging to trade at ridiculous levels and now we're seeing the fallout from an "EV bubble".

Risk Factors: Major Competition from Bigger, More Established EV Charging Companies

Not only is Blink Charging stock overvalued, but they are not even close to becoming the #1 EV charging company in America.

Blink owns an 8% market share behind SemaConnect and Chargepoint. EVgo's upcoming SPAC merger will add even more competition to the marketplace.

EV charging market share

Source: Chargepoint.com

Blink's strategy of owning and operating all of its charging stations makes it more difficult to reach scale without raising capital through share offerings. The company only had $14.9 million in cash as of September 30, 2020. That means investors should expect more offerings and dilution in the future to fund growth expansion.

Another competitor, EVgo (CLII), is planning an IPO through a SPAC merger and this adds to the competitive landscape for Blink charging.

Wait Until Blink Charging Stock Falls in Price Before Entering a Long Position

A P/S ratio of 200 is unsustainable and BLNK stock will continue to fall in price. I wouldn't even consider buying a single share until BLNK stock trades under $20. In fact, a $10/sh to $15/sh range would present a more reasonable buying opportunity but BLNK stock hasn't found support yet and continues to crash in price.

Blink Charging is a prime target for short sellers or put option buyers who want to profit from BLNK at its inflated price levels.

If you're a long term holder of BLNK stock then be prepared for more downside risk in the future.

Conclusion

I'm staying away from Blink Charging at the moment because BLNK stock is too expensive. There is a lot of competition in the EV charging space and Blink doesn't have a lot of cash on hand to fund growth.

Future share dilution will reduce the value of each share and could cause the number of shares outstanding to soar in numbers.

While I like the growth story here, I think Chargepoint and EVgo are much better values at the moment.

This article was written by

Investor Trip

3.57K Followers

Investor Trip is an investment research company founded in 2006 by Tarik Pierce. Tarik Pierce studied Economics at Dartmouth College and focuses on high CAGR stocks and cryptocurrencies. Our investment strategy is to identify sectors with massive growth potential then pick the biggest & best companies that will become future winners. Follow us to receive notifications whenever a new article is published.

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