What happened
Until Thursday, hydrogen fuel cell stocks Plug Power (PLUG 6.99%) and Bloom Energy (BE 15.50%), and electric vehicle (EV) charging stock Blink Charging (BLNK 1.59%), all looked poised to end this week on a positive note. Each of these stocks, though, extended their declines and traded even lower Friday, crashing as the day progressed. Here's how much these stocks had fallen by the close of the session.
- Plug Power: Down 5.7%.
- Bloom Energy: Down 4.5%.
- Blink Charging: Down 9%.
Are these stocks headed for a meltdown?
So what
Although all of these companies are involved in clean energy technologies, that's not why Plug Power, Bloom Energy, and Blink Charging sank in tandem today. The issue was another common link between them: They're all growth stocks.
The latest data from the U.S. Bureau of Labor Statistics spooked the markets on Friday. The Consumer Price Index (CPI), which measures changes in the prices people pay for a market basket of goods and services, rose by 8.6% year over year in May. That was its steepest increase since December 1981.
Put another way, inflation in the U.S. is at a 40-year high, due primarily to surging food and oil and gas prices.
Rising inflation typically drives the Federal Reserve to boost interest rates, which can eat into corporate profits, and growth stocks are often hit the hardest in such a setting. Investors fear that higher interest rates will only add to the cost of doing business for growth companies and may even force some to put parts of their expansion plans on the back burner.
Plug Power, Bloom Energy, and Blink Charging are all still trying to build their customer bases, and none are profitable yet, so it's imperative for them to not just grow revenues but also to improve their margins to break even. A high inflation and interest rate environment could make those tasks tougher.
Investors in Plug Power have had another reason to worry, though.
NASDAQ: PLUG
Key Data Points
Plug Power filed an automatic shelf registration statement on June 8. This means the company can now sell a variety of securities to raise funds over the next three years, including common stock. A secondary issue of common stock is typically considered a negative event for existing shareholders as it dilutes the value of their shares.
Of course, it's purely speculation for now, but investors often believe such a filing portends an upcoming secondary issue of shares.
In sharp contrast, investor confidence in EV charging stocks like Blink Charging got a lift Thursday when the Department of Transportation announced the Biden administration's intention to jump-start the construction of a 500,000-electric vehicle charger network across the U.S., to be completed by 2030. Funding for that was part of Biden's bipartisan infrastructure law, which he signed late last year.
NASDAQ: BLNK
Key Data Points
The president wants to make EV charging more easily accessible to all drivers, which should ideally encourage more people to buy EVs. And as more EVs sell, demand for EV chargers should rise, which is good news for companies like Blink Charging.
Yet that upbeat outlook was not enough to allow investors to keep their chins up after seeing Friday's gloomy-looking economic data.
Now what
Interestingly, all three of these stocks hit 52-weeks lows last month. Investors were expecting to see the stocks rebound, but the latest CPI data dashed that hope for now.
As I mentioned earlier, Plug Power, Bloom Energy, and Blink Charging are all loss-making companies, and higher costs, whether they stem from fuel, labor, or interest expenses, are the last thing they want to see. Investors, therefore, may want to dial back their expectations regarding profits from these companies for now. Instead, they should focus on their top-line growth. If revenues rise steadily, profitability shouldn't be too far away.
NYSE: BE
Key Data Points
From that standpoint, Bloom Energy is leading the pack. It expects to generate between $15 billion and $20 billion in annual revenues by 2031, compared with the $1 billion it generated in 2021. Plug Power is growing its top line, too, and foresees $3 billion in revenue by 2025 versus its estimate for up to $925 million this year.
Blink Charging is a much smaller company, but it's also firing on all cylinders, having grown its revenue by a whopping 339% year over year in the first quarter to a record $9.8 million.
