3 clean energy stocks that could collapse
Clean energy stocks have been on fire for the past six months as investors bet on the future of electric vehicles and renewable power electricity. And almost all parts of the industry have been pulled higher.
As clean energy stocks have increased, some have gone so far that they could be exposed to a crash. Three of our silly contributors think Flashing charge (NASDAQ: BLNK), Connect the power (NASDAQ: PLUG), and Clean energy Fuels (NASDAQ: CLNE) are overvalued and set for great recoil.
A puzzle in EV charging
Travis Hoium (Flashes when charging): The idea of building and owning a huge network of EV charging stations seems like a great idea as EV sales increase, and that’s why Blink Charging has become one of the hottest stocks. from last year. But the company may not be what it seems and is absurdly valued today.
Let’s start with the economic model. Blink Charging is primarily a company that manufactures and sells EV chargers. It sells them to other charging networks, commercial building owners and home owners. Of the 15,716 charging stations it had deployed as of September 30, 2020, 8,772 have been sold to third parties and not on the Blink network. In the first three quarters of 2020, 69% of revenue came from sales of hardware products. Let’s be clear: to this day, most of what the company does is make and sell a hardware product, which does not involve owning the charging network and has no recurring revenue.
A smaller percentage of the company’s chargers end up on what’s known as the Blink network, which had 6,944 chargers at the end of September. These are chargers that generate recurring income through the charging of electric vehicles and other costs. In the first three quarters of 2020, $ 800,000 of $ 3.8 million in revenue was generated through billing and network charges.
What should not be overlooked is how small these numbers are. Over the past year, Blink Charging has only generated $ 4.5 million in revenue, which is incredible for a company with a market cap of $ 1.7 billion. And the losses for Blink Charging are almost three times the revenue.
Blink Charging’s valuation is insane and the charging network doesn’t have as many chargers as investors might think, but what I think really hurts Blink Charging is how much its competitive edge. is fragile. EV chargers are a commodity, electricity is a commodity, and the connection between chargers and EVs is an industry standard. Anyone can install a charger anywhere at a relatively low cost. I don’t see how even the best charging network will have a competitive advantage, and electric vehicle charging is certainly not the kind of business I would pay a huge premium for today.
Potential, but expensive
Howard smith (Power of the plug): Plug Power relies on a hydrogen economy and has taken steps to position itself for this future. In the past two months, it has announced three agreements to expand its global reach. This week it announced the completion of a SK group, with a capital investment of $ 1.6 billion. It will give the South Korean industrial company a 9.6% stake in Plug Power, and the companies will form a joint venture (JV) to establish a fuel cell plant and accelerate expansion into Asian markets, including including China.
Last month, Plug Power and the French automaker Renault group (OTC: RNSDF) announced plans to form a 50-50 joint venture to integrate Plug Power’s fuel cell technology into commercial vans in Europe. The joint venture aims to claim more than 30% of the market share of European fuel cell light commercial vehicles. And earlier this month, the company announced its partnership with Acciona, a supplier of renewable energy infrastructure solutions. The company will be a 50-50 joint venture that hopes to gain a 20% market share for green hydrogen activities in Spain and Portugal.
Nationally, the company is working on building a green hydrogen network that can compete with diesel fuel. Plug has announced plans for a new green hydrogen facility using hydropower in western New York to serve the northeast. Combined with its Tennessee facility, the company expects the network to expand to provide transportation fuel at costs similar to diesel.
All of this is a good foundation and puts the business in a good position if adoption spreads. But the stock price is currently perfect, even after a 35% drop from recent highs. In his recent quarterly report, Plug said gross billing increased 42.5% in 2020 from 2019. In a previous business update, management raised its target for 2021 to $ 475 million, a further increase of 41 % compared to 2020. It has also raised its gross billing outlook for 2024 by 40%. to $ 1.7 billion.
Assuming it all turns into recorded revenue, valuing the business today based on the price / sales ratio translates to 55 times 2021 sales and 15 times 2024. It’s expensive even if we knew that sales were guaranteed. There is potential here, but I expect the share price to continue to rise before there is any more certainty.
Already a bumpy ride
Jason hall (Clean energy fuels): I am a big fan of clean energy fuels; I have been saying for years that this is one of the least understood values of the transition to renewable energies. I have regularly pointed out that major truck fleet operators are adopting gas, specifically Clean Energy’s Redeem, its brand name for renewable natural gas generated from human-made waste such as landfills, agricultural activities and wastewater treatment. As much as investor sentiment was looking for a future powered by electricity and hydrogen, renewable natural gas – and Clean Energy’s role in providing it – was not getting enough credit.
Well that changed a lot over the past year with stocks gaining over 450%.
More recently, however, we’ve seen the stock drop by around 30%, and I think it’s possible that we may see further sales.
The reality is that the company’s growth is expected to remain somewhat modest, and potentially at rates that fall short of investor expectations. The reality of its industry is that fleet operators are simply slow to deploy new vehicles, and impatient investors are likely to keep the stock highly volatile. Clean Energy is expected to release its fourth quarter results on March 9 and if investors are not happy with the results, stocks could continue to fall sharply. This is all the more true given that one of its main customer groups is made up of airport transport fleets and that airport traffic is still in sharp decline.
What should an investor do? I think patience will pay off, and continued sale of this high quality company could prove to be a buying opportunity, at least for those investors willing and able to buy and hold for years to come.
Too far too fast
They aren’t necessarily bad companies, but their stocks have gone too high, too fast for investors to stick with them right now. And if the market collapses, these stocks could also fall.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.