KEY POINTS

  • After electric vehicle-related stocks hit a recent high with the passing of the Inflation Reduction Act, they have since decreased in value.
  • As inflation and interest rates retake center stage, investors are selling off these stocks as none are profitable.
  • Each management team must make a difficult choice between expansion and capital preservation.

What’s going on with EV charging stocks

Shares of EV charging stocks were dropping on Monday. Yesterday, the stocks of electric vehicle charging station companies ChargePoint Holdings (NYSE:CHPT)Blink Charging (NASDAQ:BLNK), and Volta (NYSE:VLTA) all plunged, with respective declines of 6%, 7.2%, and 7.0% as of the market’s close.

There was no new information from any of these firms today. Still, the entire technology, clean energy, and electric vehicle sectors were down considerably more than the market. This drop is likely due to a renewed concern over the direction of interest rates (which are determined by inflation).

Why we care

On Monday, the yield on the 10-year Treasury Bond rose over 3%. This halted its month-long decline after reaching a high of around 3.48% in June and falling to 2.6% by July’s end.

When long-term yields climb on fears of inflation being more persistent, that harms growth stocks because the bulk of their earnings and thus value will be well out into the future. Given this, it’s no surprise that these EV charging stocks were dropping now.

These three firms are investing a lot of money in building out their charging stations worldwide. However, the paybacks will take many years. ChargePoint lost $304 million, Blink lost $72 million, and Volta lost $276 million on their bottom lines last year.

Each of these companies has risen considerably over the previous month, culminating in the passage of the Inflation Reduction Act, which provides incentives for customers looking to buy electric cars and tax credits for businesses that build green energy projects. While it’s impossible to say how this will affect these three firms, the bill’s passage is likely a positive development for EV charging businesses.

However, after the bill’s passage, investors are “selling the news,” with each stock down from its high point over the past two weeks.

What now

If you want to invest in the growth of electric vehicles, these three companies could be decent options. However, it’s important to remember that they are all risky ventures as long as they continue operating at a loss. ChargePoint has seen its stock drop 27% in value over the past year. Also, Blink isn’t far behind with a 23% drop. Furthermore,  Volta, the smallest company out of the three, is down an astounding 78%.

ChargePoint is the largest company of the three, with a market cap of $4.8 billion and 188,000 charging stations in North America, Central America, and Europe combined. Blink presently falls behind ChargePoint at 51,000 installed charging stations across all geographies but holds a close second place with just over a $1 billion market cap.

Of the three, Volta is the smallest, amounting to only $341 million and 2,950 charging stalls, mostly in America. Furthermore, Volta has large two-sided screens attached to its station that loop advertising content. The firm has close to 5,500 screens currently connected to its charging ports.

Installing charging ports, collecting regular software, and advertising money in the future is a good business model. However, each of these firms has significant growth priced into its stock price. They will also require additional investment to expand their networks. They continue to face a problematic near-term climate that will necessitate a choice between growth and capital retention because they are currently burning cash to install ports and develop their networks.

As with many debt-ridden growth companies, these remain highly susceptible to inflation and interest rate movement, both up and down. So it’s no surprise that investors are selling off today, given the upcoming weekend’s meeting of Federal Reserve officials in Jackson Hole, Wyoming.

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