The need of a robust charging infrastructure to support the growth of electric vehicles (EVs) is undisputed. What isn't as clear is which players will be instrumental in developing this infrastructure and, more importantly, whether can they do this profitably.
Let's discuss which of the two top EV charging stocks, ChargePoint (CHPT 0.35%) and Blink Charging (BLNK 0.19%), is a better buy right now.
ChargePoint owns a bigger charging network than Blink Charging. ChargePoint has around 163,000 charging ports, 45,000 of which are in Europe.
By comparison, Blink Charging has sold or deployed 18,730 chargers as of Sept. 30, 2021. Of these, 7,243 chargers are on the Blink network, while the remaining ones are non-networked. The non-networked chargers are largely residential chargers.
Blink generates revenue through product sales, charging services, and network fees. Product sales account for roughly 75% of Blink Charging's revenue. Likewise, ChargePoint also generates roughly 70% of its revenue from hardware sales.
Like Volta, Blink plans to use its charging points as digital advertising spaces. That will add to the company's revenue.
In terms of differences, unlike ChargePoint, Blink owns a large percentage of its charging stations. The company believes that such ownership allows it to control pricing of its services and will help it retain growing revenue, as the utilization of these stations will increase over the years. Whether this model will give Blink Charging an edge over competitors or not remains to be seen.
As their networks grow, both companies expect recurring revenue to become an increasingly higher portion of their total revenue.
EV charging stocks face risks
Achieving sales growth doesn't look like a challenge for EV charging companies right now. However, profitability seems to be a challenge. Blink Charging has been incurring losses for years.
ChargePoint, too, is incurring losses since it went public in early 2021. ChargePoint is still years away from profits, and the company expects to generate positive EBITDA in 2024.
Both the companies are incurring high levels of sales, marketing, research and development, and other administrative expenses to boost growth and remain innovative. As these companies mature, growing high-margin software revenue, and lower expenses, should help them generate positive net margins over time.
On the positive side, both ChargePoint and Blink Charging have been able to grow their gross profits recently.
Like several other companies in the EV charging space, both ChargePoint and Blink Charging hope to benefit from the expected growth in EVs, as well as the government's support for the same. The bipartisan infrastructure law provides for a $7.5 billion investment in EV charging infrastructure.
However, the business models of EV charging companies are still evolving. The players still need to prove that they can operate charging networks profitably and, over time, without government incentives.
And the better buy is...
ChargePoint's stock seems to be trading at a better valuation based on price-to-sales ratio. As both the companies are loss-making, their price-to-earnings ratios are not meaningful.
The electric vehicle charging market is crowded with several players trying to make a place for themselves. Though how the model will evolve over time remains to be seen, early movers and established players will likely have an edge over newer entrants. ChargePoint is the larger player, with far more stations and a much higher revenue than Blink Charging.
A bigger charging network and better valuation make ChargePoint look like a better buy than Blink Charging stock right now. Blink does not seem to have any specific edge over ChargePoint, at least at this point.
Having said that, it is worth noting that both the stocks entail significant risks and are suitable only for investors with a high level of risk tolerance.