2023-06-10 07:00:00 ET
Summary
- Blink Charging is suddenly in a precarious position with North America EV charging stations suddenly shifting towards the NCAS standard of Tesla.
- The company doesn't have the financials to thrive during a period of market confusion as suggested by the CEO whether or not their business is impacted directly.
- The stock hit new lows due to the questionable path to profits.
The EV charging station network stocks already faced tough business models and the sudden industry shift towards working with the Tesla ( TSLA ) Superchargers is a huge roadblock. Blink Charging ( BLNK ) is the prime example of a company that doesn't need any competitive pressure or additional confusion in the sector due to weak financials and limited cash. My investment thesis remains ultra Bearish on BLNK stock, even with Blink hitting new lows following the 10% dip to close the week.
Tesla Move
In a surprise move, General Motors ( GM ) announced a collaboration with Tesla. The auto OEM plans to integrate the North American Charging Standard (NCAS) connector design to its EVs beginning in 2025 in a move to utilize the 12K Tesla Superchargers across North America.
Ford ( F ) had already announced a similar partnership with Tesla in a move to utilize the large Supercharger network already in place and potentially bypass the demand for other chargers. The 3 auto OEMs combined for 72% of the U.S. EV market leaving limited remaining focus on the Combined Charging System ((CCS)) standard.
At the margin, Blink sees the deal as more of a confusion to consumers as much as an impact to their business. The new CEO made the following comments at the TD Cowen's Sustainability Week conference:
I mean, it creates confusion... our perspective is that 90% of our business is elsewhere anyway, so we got a 10% issue here.
Blink is focused on working with auto dealers and fleet type customers such as the U.S. Postal Service while the company can easily offer an adapter for current NACS vehicles. Tesla claims the charging connector is half the size and twice as powerful as the CCS connectors in a prime reason that Ford and GM are shifting alliances. The crazy part is that despite Tesla being the only company on the NACS standard now, the company claims the charging standard has 60% more stalls than the CCS-equipped networks combined.
Business Model Problems
Blink has a hybrid business model where investors don't really know the financial aspects of any particular charging station. As with most of the charging station network companies, the vast majority of sales are related to low margin product sales.
For the last quarter, Blink product sales were $16.4 million, up over 100% from $8.1 million last Q1. The company did see some margin improvements from product sales, but the overall gross margin was only 21% in Q1'23.
The total gross was only $4.5 million while the goal is just 30%. As the company points out, the service revenues in Q1 were only $4.8 million in the quarter.
The problem is that the Tesla deals are likely to hurt the charging service revenues. The fear is that consumers will gravitate towards the Tesla Superchargers and utilization on Blink chargers will fall while the company only produced $2.9 million in charging service revenues.
As mentioned above, Blink only produced a Q1'23 gross profit of $4.5 million with operating expenses up at $35.4 million. What ultimately matters on the revenue side is the gross profits that are very limited.
Blink added 64,461 chargers in the quarter to reach a total of 72,939 sold or deployed to this point. The company has no lack of chargers already sold, but the problem is the limited revenue contribution from charging stations sold on minimal positive margins. Selling a bunch of chargers at very low gross margins doesn't add much value, yet this appears the primary business model so far.
At the margin, Blink isn't impacted by the Tesla deals and the company continues building out charging stations. The company still has to figure out how to reach profitable operations with a $17.8 million EBITDA loss in the quarter while the cash balance is only $103 million. Blink actually burned $24.2 million in cash during the quarter.
The big negative here is that deals with the U.S. Postal Service and plans to install ~700 DC fast chargers this year could be delayed as hosts take time to figure out the implications of the GM and Ford partnerships with Tesla. The company isn't in the financial position for installations pushed out into the future or connector alterations to current chargers.
Ultimately, Blink has a lot to prove on whether the business model actually ramps to profits. The market switching to the Tesla charging standard throws a monkey wrench in the plans.
Takeaway
The key investor takeaway is that BLNK stock has slumped to $5, but the company is in a very weak market position as a distant charging network to market leader Tesla. A lot of details still need to be worked on, on how these deals impact federal funding, but investors should avoid the stock with the possibility of very dire outcomes without the company finding a quick path to profits.
For further details see:
Blink Charging: Tesla Roadblock