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2020 has already been an incredible year that future generations will be reading about in their history books.
There have been extraordinary disruptions in all facets of life including politics, health, social dynamics, and economics. And of course, these developments have led to several second and third-order effects whose impacts are shaping our lives.
While many of the long-term effects of the coronavirus are unclear, there’s no doubt that the pandemic is affecting different sectors of the economy in different ways. There’s no better illustration of this than the stock market, where certain stocks were decimated by the crisis, while others saw new highs, as revenues and profits accelerated.
Surprisingly, one of the strongest industries has been electric vehicle (EV) and alternative energy stocks. This isn’t intuitive, as typically, alternative energy stocks tended to rise and fall with oil prices. The pandemic crushed all sorts of energy prices due to lower demand.
However, these groups were able to outperform for three key reasons:
- Technological improvements have led to falling costs and improved efficiency which means that we are nearing the “crossover point” when these technologies will be able to replace traditional vehicles and sources of energy production.
- Governments, all over the world, are committed to reducing pollution, helping foster new industries that could create high-paying jobs, and are being led by younger generations who believe more fervently in climate change and the need to address it.
- The coronavirus has led to growth expectations plummeting, and the Fed to aggressively cut rates. This has increased investors’ appetite for growth opportunities. EVs and alternative energy are one such
Charging Stocks
The strength in EVs and alternative energy has been so widespread and powerful that it’s positively impacted companies in adjacent industries and participating in the supply chain. For example, commodity stocks that mine materials used in batteries like Albemarle (ALB) and FMC (FMC) are also trading at multi year highs.
One challenge for mass adoption of EVs is that it requires battery charging infrastructure. We take it for granted that you can fill your car with gas anytime it gets close to empty, regardless of where you are because gas stations are abundant.
For EVs to displace gas-powered vehicles, it’s necessary to set up charging stations everywhere. Some of the companies working on this challenge are Blink Charging (BLNK – Get Rating), Chargepoint Networks, and Nuvve.
Blink Charging (BLNK)
BLNK has been one of the hottest stocks in the market. It’s up nearly 2,000% since its March low. And, the stock is up 211% in November.
However, the stock’s parabolic ascent looks to have ended this week as it’s off 27% from yesterday’s high. One reason for BLNK’s drop was negative comments from infamous short-seller Andrew Left.
Left criticized BLNK for its lackluster R&D spending, weak revenue, and history of misdeeds by management. It believes that BLNK is going to have to issue dilutive shares to raise money. It believes that BLNK will be worth $10 in the near-term, once additional shares are issued.
There’s some credence to Left’s comments, as BLNK’s financials don’t justify its valuation. Additionally, the company’s revenue over the last 12 months was $4.5 million, while it lost $12.8 million which shows a lack of heavy investment in R&D which would be required to build out an infrastructure of charging stations.
Bulls would argue that BLNK’s shares are reflecting its potential. As EVs are gaining traction, there will be a need to build charging stations. This endeavor would likely be supported by public funds and EV makers as it would lead to the industry’s growth.
Currently, the POWR Ratings are also bullish on BLNK as it has a Buy rating. It has an “A” for Trade Grade and a “B” for Peer Grade. Among Specialty Retailers, it’s ranked #15 out of 36.
Chargepoint Networks
Switchback Energy Acquisition (SBE – Get Rating) is a SPAC merging with Chargepoint Networks. Since the deal was announced in mid-September, SBE is up more than 235% as it’s been pulled higher along with other clean energy stocks.
The deal between SBE and ChargePoint values the company at $2.4 billion and is expected to close on December 15th. ChargePoint believes that the EV charging market will be a $130 billion market by 2030. Currently, it is the first company in this space and is the market leader by a significant margin. Right now, it has 115,000 charging stations around the world and expects to build 2.5 million by 2025.
Interestingly, while Left was bearish on BLNK, he sounded more upbeat about ChargePoint’s prospects, pointing out that it has a 73% market share and much more meaningful spending on R&D. Another contrast is that ChargePoint had $147 million in revenue in 2019.
Nuvve
The newest EV charging company to enter the public market is Nuvve, which is merging with the SPAC, Newborn Acquisition (NBAC – Get Rating). Nuvve is slightly different from ChargePoint and Blink Charging in that it’s in the vehicle-to-grid (V2G) charging space.
Blink and ChargePoint are considered V1G, since they support charging infrastructure for EVs which utilize existing electric utilities to charge vehicles. V2G powers electric cars but also allows power from electric cars to flow back into the grid. Proponents of V2G believe that this will make EVs more sustainable and put less stress on the grid.
Nuvve believes that the current electric grid can’t handle charging millions of EVs. Its solution lets excess electricity from EVs feedback into the grid which it believes will lead to cost-savings and environmental benefits. It’s believed this could particularly be beneficial for commercial vehicles, electric buses, and EVs owned by government entities.
However, there are many doubters about V2G. Notably, Elon Musk’s initial plans for Tesla’s charging stations were to go with a V2G, but they’ve backed off those plans. Currently, Nuvve’s technology is being tested out in pilot programs through partnerships with European governments. It’s also expected to begin another pilot program in California as well.
For investors who believe that V2G is the future of electric charging, Nuvve is an attractive investment, as it’s the clear leader in the space.