High Costs And Stiff Regulation Will Imperil EV Charging Future

Key Takeaways

• High operational costs, lack of sustainable profitability, and regulatory uncertainty threaten future revenue growth and the ability to self-fund expansion.
  
• Rising competition, industry consolidation, and the shift toward at-home charging challenge market share, utilization rates, and recurring service revenues.
  
• Growth in recurring revenues, strategic acquisitions, cost reductions, international expansion, and resolution of legacy liabilities are positioning Blink Charging for improved profitability and diversified growth.

Catalysts

Through its subsidiaries, owns, operates, manufactures, and provides electric vehicle (EV) charging equipment and networked EV charging services in the United States and internationally.

• Slower-than-expected adoption of electric vehicles in certain regions due to macroeconomic pressures or consumer reluctance could substantially limit demand for public EV charging infrastructure, leading to languishing revenue growth and underutilized charging assets.
  
• Increasing regulatory uncertainty and potential reductions or shifts in government subsidies for EV infrastructure may reduce the economic attractiveness of new charging site deployments, heightening risk to both top-line revenue expansion and overall profitability.
  
• Blink Charging continues to face persistently high operational costs relative to peers and has not demonstrated sustainable profitability, with significant ongoing net losses and a second-quarter adjusted EBITDA loss of $24.4 million, which could jeopardize future net margins and the ability to fund growth internally.
  
• The EV charging industry is likely to face accelerated consolidation and intensified competition from major automakers and utilities, posing a threat to Blink's market share and compressing pricing power, which could further squeeze gross profit and operating earnings.
  
• The increasing prevalence of at-home and workplace charging solutions may cannibalize demand for public charging networks, driving lower utilization rates for Blink's infrastructure and undermining recurring service revenues in the long term.

Blink Charging Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Blink Charging compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Blink Charging's revenue will grow by 16.6% annually over the next 3 years.
• The bearish analysts are not forecasting that Blink Charging will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Blink Charging's profit margin will increase from -203.8% to the average US Electrical industry of 10.3% in 3 years.
• If Blink Charging's profit margin were to converge on the industry average, you could expect earnings to reach $17.1 million (and earnings per share of $0.15) by about August 2028, up from $-213.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 8.8x on those 2028 earnings, up from -0.5x today. This future PE is lower than the current PE for the US Electrical industry at 30.8x.
• Analysts expect the number of shares outstanding to grow by 3.5% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.87%, as per the Simply Wall St company report.

Blink Charging Future Earnings Per Share Growth

Risks

• Accelerating growth in recurring service revenues, especially from charging network utilization and DC fast charging, suggests growing demand and increased asset utilization, which could strengthen recurring earnings and future revenue stability.
  
• Strategic acquisitions like Zemetric are enhancing Blink's product portfolio with cost-optimized, intelligent, and interoperable hardware and software, potentially unlocking new markets such as fleet and multifamily, which may drive topline revenue growth and improve net margins through higher-margin products.
  
• Significant and ongoing cost reduction initiatives, including an $8 million annualized cut in operating expenses and workforce reductions, are positioning Blink to operate with improved efficiency, which could help achieve profitability and support stronger net margins.
  
• Expansion into international markets, bolstered by new leadership in Europe and the entry into an SPV with Axxeltrova for UK infrastructure deployment, is likely to open new, diversified revenue streams and improve overall operating leverage, positively impacting both revenue and EBITDA margins.
  
• Resolution of legacy liabilities, including the removal of the $23.5 million Envoy contingent consideration and the structuring of performance-based stock and warrant payouts, has strengthened the balance sheet and reduced financial overhang, potentially supporting future earnings and capital allocation toward growth initiatives.

Valuation

• The assumed bearish price target for Blink Charging is $1.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Blink Charging's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $5.0, and the most bearish reporting a price target of just $1.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $166.2 million, earnings will come to $17.1 million, and it would be trading on a PE ratio of 8.8x, assuming you use a discount rate of 8.9%.
  
• Given the current share price of $1.04, the bearish analyst price target of $1.0 is 4.0% lower. The relatively low difference between the current share price and the analyst bearish price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.