It was a rough week on the market for alternative energy companies, especially in the fueling space. Shares of Clean Energy Fuels (NASDAQ:CLNE) fell 16.5% in the first four days of trading, hydrogen company Ballard Power Systems (NASDAQ:BLDP) dropped 10.5%, and EV charging companies Blink Charging (NASDAQ:BLNK) and ChargePoint Holdings (NYSE:CHPT) fell 11.5% and 16.6% respectively.
A combination of falling fossil fuel prices, lower production of EVs, and a sell-off in growth stocks hit all of these companies this week. And investors may simply be taking some profits after a huge run-up in alternative energy stocks over the past year.
Commodity prices can often affect alternative energy stocks short-term and this week was no different. The spot price of West Texas Intermediate crude oil has fallen 3.9% since the close of trading on Friday as OPEC members squabble over output levels of oil.
Oil is a direct competitor to Clean Energy Fuels and Ballard Power Systems in the fuel market, so lower oil prices are seen as bad news for both companies. The long-term reality is that clean fuel from either company can be competitive with oil even if oil prices fall further. But that long-term story doesn't often play out in short-term trades over a few days or a week.
Chip shortages are also affecting energy stocks this week. Charger stocks Blink Charging and ChargePoint are both reliant on the growing adoption of electric vehicles to drive demand for their charging stations. So, more bad news about auto production levels is hampering the stocks this week. Taiwan Semiconductor Manufacturing, the world's largest contract chip manufacturer, said it expects the global chip shortage to last through the end of 2022. And the auto industry's production could be severely hampered as a result. Fewer EVs on the road means less need for charging stations, which is bad news for charging station owners.
To top it off, the market pushed a lot of growth stocks lower this week in a reversal of the recovery in growth stocks we've seen over the last few months. The market's interest in high-growth stocks has ebbed and flowed this year and at least so far this week the trend has been lower overall.
Volatility is to be expected in alternative energy stocks and this week's losses are partially giving back gains from the last few months. So I wouldn't worry too much about this week's performance.
What's more important to look at long-term is the trends that will affect the industry. The chip shortage for automakers could meaningfully push back EV production, which could have an impact on when Blink Charging and ChargePoint turn the corner toward profitability. And investors should keep an eye on production trends, which so far haven't hit the EV industry as hard as traditional vehicle production.
Long-term, the energy industry trends are still working in the favor of alternative energy stocks, so I wouldn't sell here. But don't be surprised if volatility follows these stocks, for better or worse.