A robust charging infrastructure is a prerequisite to fuel electric vehicle (EV) growth. That explains the rapid growth in the revenue of EV charging companies such as Blink Charging (BLNK -0.85%). So, does the strong revenue growth make Blink Charging stock a buy?
Blink's impressive revenue growth
Blink Charging reported revenue of $9.8 million in the first quarter, up 339% over the same quarter last year. The company's strong revenue growth is driven by growth in the number of chargers it sold or deployed.
Image source: Blink Charging.
The number of chargers Blink Charging sold or deployed more than doubled from 17,302 in the first quarter of 2021 to 36,337 in Q1 2022, driving the company's revenue growth. Notably, of the $7.6 million increase in revenue, roughly 41% was attributed to Blue Corner, a European EV charging operator Blink acquired in May 2021.
Although Blink Charging's revenue is growing, its losses are widening.
Image source: Getty Images.
Is Blink's growth sustainable?
Unlike gas stations, it is difficult for electric vehicle charging stations to become profitable by selling electricity. For that reason, government grants and subsidies are a crucial source of funding for EV charging companies. Blink Charging received $3 million in grants in the first quarter. The company has received $30 million in grants and rebate awards from the government since January 2021.
BLNK Revenue (Quarterly) data by YCharts
Blink Charging incurred a loss of $15.1 million in the first quarter, which was higher than the total revenue it generated during the quarter. Even though the company's gross margin is positive, it hasn't achieved bottom-line profits yet.
What's more, due to the reasons discussed above, the margins for Blink Charging could be thin when they become positive, if that happens at all. While government grants help young EV charging companies expand their footprint, they cannot be a viable alternative to business profits in the long run.
High valuations
Blink Charging stock has fallen nearly 37% so far in this year. However, it is still trading at a rich price-to-sales ratio of nearly 25.
BLNK PS Ratio data by YCharts
Considering the above factors, a price-to-sales multiple of 25 looks too high for a company that is still incurring losses. Even based on forward sales, the ratio stands at 18. For perspective, the price-to-sales ratio for the S&P 500 index as of April 1 was roughly 3. And this was also way higher than what the ratio has been historically.
In short, even though Blink Charging, and its peers, have a long growth runway, they face significant risks. There is not much scope for margin expansion, and the current valuations look steep. If you still decide to invest in an EV charging stock, ChargePoint looks like a far better bet to me than Blink Charging.
