Summary
- 2021 was a year EV charging bulls would like to forget.
- Blink continues to make positive operational developments in its business model.
- The valuation still seems stretched even after the pullback this year.
Blink Charging (BLNK) caught lightning in a bottle in 2021 by maintaining its relatively high market cap despite a collapse of its common shares and against trailing 12-month revenue that stood at just $15.4 million as at the end of its last reported quarter. The company has been able to catch the wave of strong investor enthusiasm over the growing EV economy, leading to a market cap that still stands substantially higher than its pre-pandemic averages even while down more than 50% from its 52-week high.
EV charging bulls are spoilt for choice as the now collapsed SPAC explosion saw a plethora of EV charging companies from ChargePoint (CHPT) to Volta (VLTA) and EVgo (EVGO) all go public in 2021. And like Blink, 2021 has turned out to be a relatively uneventful year for these companies as capital heavily moved away from somewhat speculative industries and small-caps to value.
The question of what 2022 now holds lingers. Is it more of the same capital destruction that characterized much of this year as bears would like to believe? This is especially as the FED accelerates the tapering of its bond-buying program to position itself to start raising interest rates as early as March to contain inflation. While the market should be pricing this in already, it could see the capital flight away from companies like Blink continue. This risk is especially heightened with recent financials that fail to justify the current $1.20 billion market cap.
Operational Progress Continues But Revenue Multiple Looks Stretched
Blink last reported quarterly earnings for its fiscal 2021 third quarter which saw revenue come in at $6.4 million. This was a year-over-year increase of 611% and a beat of $1.68 million on consensus estimates. This hypergrowth was partly driven by a rapid increase in charging stations contacted or sold to 3,016, an increase of 351% from its year-ago figure. Services revenues, which consists of charging service revenues, network fees and ride-sharing service revenues, also jumped by 425% year-over-year to $1.38 million. Blink's bulls have justified the company's high valuation on the back of the pace of this growth. The company's management has been seizing the opportunities of the transition to EVs.
This momentum is likely to ramp up next year as demand for EVs continues to grow. This is a long-term structural shift in transportation that will create a substantial tailwind over the next decade. Not often does a company stand to ride such a healthy macro environment, one set to be boosted by both rising consumer sentiment and increasingly positive government action. The latter will see $7.5 billion allocated as part of the infrastructure bill toward building out the US electric vehicle charging network.
Blink has also maintained operational momentum, recently unveiling seven new products including new EV charging equipment. The company will also launch a new network and accompanying mobile app to enhance the charging experience for its customers. And while cash flows from operations were negative at $9 million, the company still ended the quarter with cash and equivalents of $186.7 million. This provides a strong buffer for operational flexibility and expansion in the years ahead as the EV charging space heats up. This is especially as another facet of the bear case has centered around just how competitive and crowded the space is. The has created a dash for prime space as EV chargers in the best locations are likely to perform the best.
However, in spite of the fall of Blink's common shares this year, the company still trades on a price to trailing twelve months revenue multiple of 80x. Bulls would be rights to state that the company will very quickly grow into its multiple if revenue growth in the quarters ahead continues to reflect the rate of growth in the third quarter.
EVs, Charging, And The Future Of Transportation
EVs are undeniably going to play a dominant role in the future of transport and chargers will be required to keep them going. Hence, while 2021 was a terrible year for Blink, the broader long-term macro environment is positive and its conditions are conducive to the prerequisites for shareholder value creation.
There is definitely a race amongst EV charging companies to build out their network as fast as possible to gain scale and seize the leases for the best locations. Hence, I do not expect Blink to chase or even be able to attain cash flow breakeven in the near term. That said, it is hard to recommend Blink as a buy. Yes, the company is growing quickly and has a substantial cash balance to continue to ride the ever-growing EV wave. But the valuation is still steep, and a slowdown would see the common shares experience an even more brutal downward re-rating.