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If You Own These 3 Growth Stocks, You Might Want to Rethink Your Position

By Rekha Khandelwal – Jan 14, 2022 at 7:25AM

Key Points

  • Fuel cell electric vehicles have seen limited adoption so far.
  • Electric vehicle charging companies are yet to generate sustainable profits.
  • Workhorse Group is facing major challenges.

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These stocks rose significantly in the past, but their recent fall isn't without reason.

As an investor, it is important to keep a regular watch on the stocks in your portfolio. Analyzing and updating your portfolio periodically is one way to ensure that it stays in sync with your investment objectives.

At times, the reasons that convinced you to buy a stock may no longer apply. Changing markets, a company's poor performance, or increased competition are just some of the countervailing reasons that can cause you to rethink your position in a stock.

Here are three stocks that aren't faring well lately. What's more, there are good reasons for the recent fall in the prices of these stocks. If you own any of these stocks, you may want to revisit them to see if your investment thesis still holds true. Let's discuss why owning these three stocks may not be the best idea right now.

Couple Writing Information While Enjoying Coffee.

Image source: Getty Images.

1. Plug Power

Hydrogen fuel cells were expected to play a major role in helping countries reduce emissions and achieve their sustainability goals. However, that story doesn't seem to be evolving as fuel cell companies, including Plug Power (PLUG 6.07%), expected.

From January to November 2021, roughly 16,200 fuel cell electric vehicles (FCEVs) were sold globally. That's higher than roughly 10,000 FCEVs sold in 2020. However, the number pales in comparison to around 6 million electric vehicles sold in 2021. Higher costs and a lack of refueling infrastructure are among the key things restricting the growth of FCEVs.

Hydrogen fuel cells are still considered to be a great option for decarbonizing heavy-duty fleets, marine transport, aviation, and other sectors where batteries aren't viable yet. However, falling costs of batteries and improving energy density are making batteries increasingly attractive even in the heavy-duty transport segment. All in all, hydrogen fuel cells have a far more limited market than many were hoping for some years back. At the same time, competition in the segment has increased over the years.

Thus, Plug Power, which has already been incurring losses for decades, may find it increasingly more difficult to achieve profitability.

PLUG Revenue (Quarterly) Chart

PLUG Revenue (Quarterly) data by YCharts

Even after a 53% fall in one year, Plug Power stock is up 1,600% over a three-year timeframe. If you own this stock, it might be time to head for the exits.

2. Blink Charging

The rapid growth in the use of electric vehicles (EVs) clearly indicates the need for a robust charging infrastructure. However, EV charging companies have yet to become profitable. Companies are adopting different approaches to achieve profitability in this evolving sector. Yet, Blink Charging (BLNK 8.30%) does not seem to be the best bet in the EV charging segment right now.

Even though Blink Charging's revenue is rising, its losses continue to widen.

BLNK Revenue (TTM) Chart

BLNK Revenue (TTM) data by YCharts

The stock doesn't look attractive from a valuation perspective, either. Even after falling 53% in the last year, Blink Charging stock is up 1,210% over a three-year timeframe. The stock is trading at a price-to-sales ratio of 62 -- higher than ChargePoint's ratio of 23.

BLNK PS Ratio Chart

BLNK PS Ratio data by YCharts

The stock looks expensive based on forward price-to-sales ratio, too. Blink Charging does not seem to have any specific edge over others in the EV charging segment. Despite being in operation for years, the company continues to incur significant losses.

If you own Blink charging stock, you might want to consider replacing it with some other EV or EV charging stock.

3. Workhorse Group

Electric vehicle maker Workhorse Group (WKHS 6.00%) is surely struggling right now. The company has long been falling behind on its production plans. What's more, it recently recalled the 41 C1000 delivery vans it had delivered so far and has suspended the production of this van model.

Workhorse's new CEO, Rick Dauch, is working to overhaul the company's operations and launch new vehicle models. However, competition in the commercial electric van segment is immense. General Motors, Ford Motor Company, Rivian, Stellantis, and other EV makers are all offering, or plan to offer, electric vans. Given Workhorse's track record, it could be very difficult for it to get customers when it does come up with a new model.

The steep fall in Workhorse's stock price this year reflects the above concerns. However, the stock's price is still up 418% in three years. Given the concerns relating to its growth, you may want to reconsider your position in Workhorse stock.

Rekha Khandelwal has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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