What happened
Shares of EV charging company Blink Charging (BLNK 4.50%) jumped 21.1% in June, according to data provided by S&P Global Market Intelligence, as electric vehicle and growth stocks became hot once again. The stock has given back some of those gains in July, losing 9.2% of its value in the first two days of trading, but has still had a good start to the summer.
The biggest news came mid-month when Blink Charging announced it would join the Russell 2000 Index as of June 28. That would set off some automatic buying by index investors, which can help push a stock higher short-term.
Image source: Getty Images.
So what
Joining an index can drive a stock like Blink Charging sharply higher in the short term, but doesn't change the underlying business. And that's what investors should be focused on in the second half of 2021.
In the first quarter of 2021, Blink Charging reported just $2.2 million in revenue and a $7.4 million loss from operations. Cost of goods sold of $2.1 million even left very little margin from regular operations, so profitability is a long way off. Growth of 72% versus a year ago was impressive, but losses continue to mount for this EV charging company.
While EV adoption continues to rise, it's not clear when we'll see charging networks generate enough revenue to become profitable. What worries me is that charging networks like Blink Charging are being aggregated into larger networks by automakers like GM, which announced its Ultium Charge 360 network in May. GM, not Blink Charging, will be the touchpoint with consumers, and that effectively commoditizes the electricity Blink is providing to users. That's not a valuable or powerful position to be in.
Now what
Blink Charging remains a highly speculative stock and is prone to wild swings on the market. In June, the company rode the trend of growth stocks moving higher along with the Russell 2000 Index news to big gains. What's not clear is when investors will expect a profit from Blink Charging. According to Yahoo! Finance, analysts are expecting a loss of $0.55 per share next year, so they don't see any income anytime soon.
We've already seen in July that gains can be fleeting for Blink Charging, and until the company can generate a long-term profit this is a stock I'll stay out of.
