2023-06-02 12:55:20 ET
Summary
- Blink Charging is a heavily shorted stock, with short interest at 27.4% of the float.
- The company has experienced significant growth on the back of increasing EV adoption but continues to make higher net losses every quarter.
- A potential short squeeze could occur if the outlook for profitability improves and negative sentiment reverses.
Blink Charging ( BLNK ) is one of the most heavily shorted stocks on the Nasdaq, with short interest at 27.4% of the float. This comes as the stock price has fallen by 56% over the last year. The reasons for the decline are multifaceted, but a Fed funds rate that has been hiked to its highest level since 2008 against an EV charging business that has gone in the opposite direction of scaling has formed the core headwinds. Critically, Blink continues to make higher net losses every quarter even as revenue grows at a healthy pace over its year-ago comps. This has rendered the business unsustainable and the antithesis of the current risk-off market sentiment. For Blink's bears, the long-term trend is clear, with the stock possibly moving back to its pre-pandemic price average. This would mean it had given back the entirety of its gains during the pandemic, a period in stock market history that was characterized by high euphoria and an embrace of all things EV.
Bulls would be right to state that the company has grown significantly from where it was in 2020 and that the outlook for EVs has brightened on the back of the 2022 Inflation Reduction Act. EV sales have gone parabolic in the US, even against financing costs that have been driven materially higher. In the US, 750,000 fully electric cars were registered in 2022, around 5.6% of the total market and 57% growth over 2021. In the UK, EV sales overtook diesel for the first time ever last year. The runaway adoption phase of EVs is now well underway in Blink's major markets, and there is a level of forward growth premium still embedded in the company's shares. These trade on a 3.92x price to forward sales multiple, markedly higher than its peer group median.
Where Are The Charging Profits?
Blink last reported fiscal 2023 first-quarter earnings that saw revenue come in at $21.7 million , a growth of 121.4% over its year-ago comp but a miss by $350,000 on consensus estimates. Growth was driven by huge gains in product sales and charging service revenue, both of which grew year-over-year by 104% and 160% respectively. Network fees, which are broadly recurring, reached $1.63 million during the first quarter. This was a growth of 911% over its year-ago comp with higher margin service revenue, network fees, and ride-sharing revenues at $4.8 million, a huge increase of 216% over the year-ago quarter.
Blink Charging Fiscal 2023 First Quarter 10-Q
This growth was purely driven by the greater use of Blink's chargers as the company continues to expand its charging station footprint. Blink contracted, deployed, or sold 6,461 charging stations during the first quarter to bring its total deployed to date to 72,939. Recent wins include being awarded a contract by the United States Postal Service to provide up to 41,500 EV charging stations and the post-period end acquisition of EV car-sharing platform Envoy Technologies for $34 million . However, Blink recorded a net loss of $29.8 million during the first quarter, up from $15.1 million in the year-ago period, even with a 186% increase in gross profit to $4.5 million.
How A Short Squeeze Could Happen
Net losses drove cash outflows from operations of $24.2 million during the first quarter, a huge increase from outflows of $11.4 million in the year-ago comp. To plug this gap, the company has been selling new shares and successfully completed an upsized public offering which raised $100 million. This would see Blink end the first quarter with a cash and equivalents position of $103.2 million, up sequentially from $36.6 million in the fourth quarter.
This reliance on the sale of new shares has meant Blink's shares outstanding are up by nearly 100% over the last three years, forming a source of dilution that comes with continued losses from operations and the specter of even more stock sales in the medium to long term. Blink is targeting full-year 2023 revenue in the range of $100 million to $110 million and a gross margin of at least 30%. This sets the backdrop for what would otherwise be a tepid performance of the common shares this year. Management stated during their first-quarter earnings call that they have positive free cash flows in view, but this will be a progressive development as the company continues to grow to realize the opportunities of the electrification of transport.
This continued unprofitability is what renders Blink an avoid for more fundamentally minded investors. However, the Fed is likely set to pause interest rate hikes at its June FOMC meeting and Blink has stated during its earnings call that they anticipate their business model increasingly scaling, especially as service revenue continues to grow. This could create unique conditions for a short squeeze as a reversal of the currently abysmal outlook for profitability would signal the start of a positive reversion of negative sentiment. I think the risk-reward skew here for the bears is poor as the stock market looks possibly set to move higher.
For further details see:
Blink Charging: A Short Squeeze Is Possibly One Charge Away