What happened
Stocks got hit hard early in Monday's trading, and prominent electric-vehicle (EV) charging companies were initially big participants in the pullback. ChargePoint Holdings (CHPT), Blink Charging (BLNK), EVgo (EVGO 0.14%), and Volta (VLTA) were down by as much as 15.2%, 12.1%, 12.4%, and 13%, respectively.
However, they saw significant recovery momentum as the market mellowed later in the day:
With plenty of risk factors already weighing on the market, indications that Russia could soon invade Ukrainian territory prompted investors to rapidly move out of stocks early in the day's trading. There doesn't appear to have been any industry-specific EV news driving pricing action on these stocks today, but the broader market momentum was enough to prompt volatile swings for many growth-dependent companies.
Image source: Getty Images.
So what
The U.S. has reportedly been discussing deploying troops to Poland, Romania, and other states bordering Ukraine ahead of a potential incursion on its territory by Russia. In addition to concerns about escalating conflict, investors have had to contend with shifting macroeconomic conditions. It's been a perfect storm of bearish market catalysts lately, and the S&P 500 and Nasdaq Composite indexes have recently been pushed into correction territory.
The Federal Reserve plans to raise interest rates this year, and also stated that it will cut back significantly on bond purchases. The Fed may even begin lightening its balance sheet with the sale of Treasury bonds and mortgage-backed securities. These shifts signal a weakening backdrop for stocks, and rising inflation and ongoing pressures from the coronavirus omicron variant certainly haven't helped either.
If that weren't enough, weak performance and guidance outlooks for some high-profile U.S. companies have prompted investors to become more risk-averse.
Business Insider reported that Peloton Interactive (PTON 2.12%) was on track to lay off 41% of its sales and marketing staff, and CNBC then reported that the exercise hardware and services company was cutting back on manufacturing amid mounting inventory. Peloton's subsequent second-quarter preliminary results actually weren't that bad, but comments delivered with the release seemed to confirm that the company was seeing some worrying performance and the need to take corrective actions.
Netflix (NFLX -8.16%) then posted disappointing fourth-quarter results and guidance, which resulted in a quick 25% drop for the streaming leader's stock. With guidance falling well short of the market's expectations and the company finally admitting that it was feeling pressure from competitors, Netflix posted its worst daily session since July 2012. That performance has had ripple effects across the market, and EV stocks haven't been immune.
ChargePoint, Blink, EVgo, and Volta have seen big sell-offs over the last year of trading, as investors have cooled on EV charging stocks and generally become more risk-averse:
With some growth-dependent companies seemingly stumbling and the Russia-Ukraine situation adding yet another bearish catalyst, it's not surprising that growth-dependent EV charging companies saw volatile trading in conjunction with market momentum today.
Now what
Even though ChargePoint, Blink, EVgo, and Volta have already seen big sell-offs, more volatility could be in the cards. To put things in context, Volta has by far the lowest forward price-to-sales multiple among the cohort, but it's still valued at roughly 8.5 times this year's expected sales:
EVGO PS Ratio (Forward) data by YCharts.
EV charging is a market that offers potentially massive long-term opportunity, but valuations for companies in the space remain highly growth-dependent, and there's potential for more turbulence in the near term. In addition to other macroeconomic factors impacting valuations for stocks, it's possible that weaker economic conditions could lead to a slower timeline for the expansion of the EV charging industry.
More players are entering the space, and relationships with automakers and governments are important factors in growth outlooks and the competitive landscape, so twists and turns in the road ahead could challenge each of these companies. It's probably a good idea to think of ChargePoint, Blink, EVgo, and Volta as high-risk, high-reward stocks even after their big sell-offs over the last year.
