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Can a path to profitability save Blink’s share price?

The Blink Charging [BLNK] share price experienced a power-out on Monday after a ratings downgrade from Cowen & Co.

The price of the electric car charging network builder slumped 11% to $38.85 between the market close on 19 November and that on 23 November 2021 after the investment bank lowered its rating from ‘outperform’ to ‘market perform’. Its target price was cut to $40 from $41.

Cowen analyst Gabe Daoud highlighted the “torrid run” the stock had enjoyed on “renewed EV and EV charging euphoria” since the passing of President Biden’s $1.2trn infrastructure bill, which included a $7.5bn plan to build a nationwide network of EV charging stations.

The Blink share price had soared 52% between 1 October and 19 November as it rode the wave brought on not only by Biden’s plans, but also headlines coming from the COP26 conference that showed governments and businesses are serious about hitting net-zero carbon emission targets.

Daoud said that although Blink remains well-placed to benefit from these industry tailwinds, but the good news was priced into the stock already. Blink has yet to earn a profit and its latest Q3 revenues of $6.4m are a fraction of its $1.6bn market cap.

Positive developments

It’s not hard to find analysts that are still bullish about Blink’s share price. Last week, HC Wainwright analyst Sameer Joshi upgraded Blink to buy from neutral and gave it a $50 price target.

Joshi said there were “several positive developments” around the stock, such as a significantly better economic environment thanks to the US infrastructure bill, adding that the administration’s intention to change the existing $7,500 incentive per electric vehicle from a tax credit to a tax refund, along with an extra benefit of $4,500 for EVs produced in US factories with union labour, should create more demand for EVs.

“This dual action of incentivizing EVs and the EV infrastructure, [and] should help overcome drivers’ ‘range anxiety’ that has thus far hindered EV growth,” Joshi said.

Roth Capital analyst Craig Irwin upped the price target for Blink’s share price to $45 from $37, following the Q3 results, saying that Blink’s business momentum will likely accelerate in the second half of next year thanks to infrastructure subsidies.

From a sevenfold rise in revenues to a 351% hike in the number of charging stations contracted or sold to 3,016, Blink’s Q3 results gave several reasons for optimism. Blink saw rising demand from residential and commercial customers and a good performance following its recent $24m acquisition of Belgian based EV charging operator Blue Corner and its 7,000-plus ports.

Blink Charging needs to keep building on these numbers. It currently has around 30,000 charging ports across 13 countries compared with rival ChargePoint’s [CHPT] 118,000.

Seeking Alpha believes Blink Charging will benefit from the government-related contracts it has snagged for cities, regions and agencies, as well as its new home charging product the HQ 150.

“The fact that they are growing these sales beyond the home products means that they will be long-term revenue generators as charging fees continue to pour in,” said a report on Seeking Alpha.

Sales growth

It added that while ChargePoint is expected to hit $900m in sales by 2025, by when Blink will hit a comparatively tiny $137m, the latter will enjoy healthier gross margins and could hit profitability first.

It also noted that Blink Charging has currently a 15% market share in the global EV market, which may reduce to 10% in 2027 because of rising competition. However, the market itself will surge from $3.8bn today to $25.5bn in 2027.

That 10% share should therefore mean around $2.5bn share of the market for Blink by that date.

There is so much to play for as society makes the shift towards electric vehicles, and many eyes will be on Blink’s growing part in that journey.

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