An EV company with almost no revenue gains 3,000% in 8 Months - topping Tesla’s rally

There is nothing about the finances of Blink Charging that would suggest it’s one of the hottest stocks in America.

It's never posted an annual profit in its 11-year history; it warned last year it could go bankrupt; it's losing market share, pulls in anemic revenue and has churned through management in recent years.

And yet a hot stock it is. Investors have bid Blink's share price up 3,000% over the past eight months. Only seven stocks -- out of about 2,700 that are worth at least $1 billion -- have risen more over that time. The reason: Blink is a green-energy company, an owner and operator of charging stations that power up electric vehicles. And if investors are certain of one thing in the mania that is sweeping through financial markets, it is that green companies are can't-miss, must-own investments of the future.

No stock better captures this euphoria than Blink. With a market cap today of $2.2 billion, its enterprise value-to-sales ratio -- a common metric to gauge whether a stock is overvalued -- has blown out to 493. For some context, at Tesla -- the darling of the EV world and a company with a very rich valuation itself -- that number is just 25.

"Everything about it is wrong," said Andrew Left, the founder of Citron Research. "It is just a cute name which caught the eye of retail investors."

Citron was one of a handful of firms that bet against Blink last year, putting on short-sale trades that would pay off if the share price fell. It's one of several wagers against stocks favored by the retail-investment crowd that have gone against Citron -- with GameStop being the most high-profile -- and prompted Left to declare Jan. 29 that the firm was abandoning its research into short-selling targets. Overall short interest on Blink -- a gauge of the amount of wagers against the stock -- has fallen to under 25% of free-floating shares from more than 40% in late December.

For the short-sellers, one of the things that raised alarms is that several figures tied to Blink, including CEO and Chairman Michael Farkas, were linked to companies that ran afoul of securities regulations years ago.

Farkas dismisses this and the other criticisms lobbied by the shorts. “When I founded the business, the naysayers questioned whether the shift to EV was real,” Farkas said in an email. “Now, as the value of our business grows, the naysayers tend to be the short sellers.”

Making money on charging is, historically, a losing proposition. In theory, a model like Blink's that involves both equipment sales and collecting user fees could become consistently profitable as government support accelerates EV adoption. But no one's done it yet.

“This market is still too small and early-stage,” said Pavel Molchanov, an analyst at Raymond James & Associates. “

Even by the industry's fairly forgiving standards, Blink's revenue is meager, totaling an estimated $5.5 million in 2020. ChargePoint, which announced plans to go public via a special purpose acquisition company last year, generated $144.5 million in revenue in 2020, according to a January filing. EVgo Services, which is nearing a similar deal to go public through a SPAC, has a smaller charging network than Blink but more than double the sales -- an estimated $14 million in 2020. Despite the wildly different revenue figures, all three companies have an enterprise value of between $2.1 billion and $2.4 billion.

Blink warned in a May filing that its finances "raise substantial doubt about the Company's ability to continue as a going concern within a year," a required disclosure when a company doesn't have enough cash on hand for 18 months of expenses.

"Electric is real. The stock prices of companies in the space are not," said Erik Gordon, an assistant professor at University of Michigan's Ross School of Business. "The dot-com boom produced some real companies, but most of the overpriced dot-com companies were lousy investments. The electric boom will be the same story. Some great companies will be built, but most of the investors who chase insanely-priced companies will be crying."

Still, the recent market boom has breathed new life into Blink, allowing it to raise $232.1 million though a share offering in January. Roth Capital Partners as recently as Friday recommended buying the stock, giving it a price target of $67, 26% above the current level. The company's prospects rely on exponential EV growth, and Farkas in January discussed plans to deploy roughly 250,000 chargers "over the next several years" and often touts the company's ability to generate recurring revenue from its network.

Currently, the company says it has 6,944 charging stations in its network. An internal map of Blink's public fleet lists about 3,700 stations available in the U.S. By contrast, ChargePoint boasts a global public and private charging network that's more than 15 times larger.

Blink was an early market leader among charging companies but has lost its lead and now controls about 4% of the sector in Level 2 public charging, said Nick Nigro, founder of Atlas Public Policy, an electric car consulting and policy firm.