I took a look at three stocks to avoid last week, predicting that Blink Charging (NASDAQ:BLNK), Chico's FAS (NYSE:CHS), and NIO Limited (NYSE:NIO) were going to lose to the market. I missed, and missed badly.
- Blink Charging had a wild trading week. The speculative operator of charging stations for electric vehicles soared 48% on Monday, only to give more than half of those gains back in the three subsequent trading weeks. Blink still was a winner, up 23.5% for the holiday-shortened trading week.
- Chico's FAS was the one stock I got right. The struggling apparel retailer had a challenging quarterly report on Tuesday -- as I expected -- and the shares moved 4.7% lower for the week.
- Finally we have NIO moving 9.6% higher. The fast-growing maker of electric cars is a rising star in China. I felt the stock's lofty valuation made it vulnerable, but investors didn't have a problem bidding NIO higher.
The three stocks averaged a strong 9.5% ascent, blowing ahead of the S&P 500's comparable gain of 2.2% for the week. Let's see if I can bounce back.
If I thought Blink Charging was insanely priced a week ago, you can probably imagine how I feel now after forgoing turkey for Thanksgiving in favor of crow. I was wrong last week, but this stock is a bucking bronco that's going to get a lot of people hurt. Let's start by just sizing up the huge price swings that the nascent charging stations operator delivered during in just four trading days last week.
- Monday: up 48%
- Tuesday: down 16%
- Wednesday: down 10%
- Thursday: gobble, gobble.
- Friday: up 11%.
We're talking about double-digit percentage moves every single day the market was open last week, ultimately resulting in a nearly 24% increase. With the volatility warning now firmly in place, let's dive into why Blink Charging may run out of juice soon.
Blink Charging begins this new trading week with a market cap above $900 million. This is a company with just $4.5 million in trailing revenue, and its revenue run rate is even lower than that given the mere $0.9 million it delivered in its latest quarter.
The bullish thesis that electric cars will only grow in popularity isn't lost on me, but pay-to-park charging stations seem like a lose-lose proposition for investors. Blink Charging is trying to grow by consolidating in major markets, but this niche will evolve and get more competitive in the future if it doesn't become obsolete.
Right now it's a dud market because folks that can't charge their vehicles at home will just park at a charging station for several hours -- long after a car is juiced up because it's convenient -- while at work. The utilization is terrible, and the payoff given the costly installations isn't financially feasible. If premium charging continues to evolve into a viable business model then gas stations will become the new leaders, especially as charging tech improves so cars get refueled faster. If electric cars become ubiquitous then paying to charge will become the equivalent of premium Wi-Fi out in the wild. When's the last time you paid to use Wi-Fi in a public space? Exactly. Every road here is a dead end, and paying 200 times trailing revenue can't end well.
It's been more than two months since Nikola last graced this weekly column, and a lot has happened. Fraud allegations culminated in founder CEO Trevor Martin stepping down. The $2 billion partnership with General Motors (NYSE:GM) announced in September is on shaky ground and has yet to close. Nikola's Badger is still not hitting the market anytime soon. It's against this backdrop that the stock has moved higher?
Nikola is vulnerable. Insiders will be able to sell their stock starting this week as the IPO's lock-up restrictions expire, and you can't blame any of them for having cold feet. Electric vehicle stocks have been rallying in November, but there a lot more things that can go wrong for Nikola than can go right at this point.
More than 1,100 stocks hit new 52-week highs on the major U.S. stock exchanges, and one of the more surprising entires is Jumia. Shares of the e-commerce platform have gone bonkers this month, more than tripling since bottoming out on Nov. 10 following a poorly received financial report.
Jumia's a leader in e-commerce and payments processing in the underserved Africa market, but there's a reason why it's been so easy to be the top dog there. There are infrastructure, fulfillment, and shopper trust challenges in Africa that could be years away from becoming viable. Jumia's business was already starting to slow down last year before the COVID-19 crisis, but now it has rattled off three consecutive quarterly losses. It has lost more money over the past year than it has generated in revenue.
There are a lot of shorts out there, so this is clearly a short squeeze taking place. The fundamentals are still a mess, so don't expect the good times to last.
If you're looking for safe stocks, you aren't likely to find them in Blink Charging, Nikola, and Jumia this week.