As of Thursday, hydrogen fuel cell stocks power plug (PLUG -5.67%) Y flowering energy (BE -4.48%)and electric vehicle (EV) charging stock load flicker (BLACK -8.97%), everything seemed set to end this week on a positive note. However, each of these stocks extended their declines and traded even lower on Friday, tumbling as the day progressed. This is how much these shares had fallen at the close of the session.
- Plug Power: Down 5.7%.
- Bloom Energy: Down 4.5%.
- Load Flicker: Down 9%.
Are these stocks headed for a crash?
Although all of these companies are involved in clean energy technologies, that’s not why Plug Power, Bloom Energy, and Blink Charging went under today. The problem was another common link between them: They are all growth stocks.
The latest data from the US Bureau of Labor Statistics spooked markets on Friday. The Consumer Price Index (CPI), which measures changes in the prices people pay for a basic basket of goods and services, rose 8.6% year-on-year in May. That was its steepest increase since December 1981.
Put another way, inflation in the US is at its highest point in 40 years, mainly due to rising food, oil and gas prices.
Rising inflation typically leads the Federal Reserve to raise interest rates, which can hurt corporate profits, with growth stocks often bearing the brunt in that environment. Investors fear that higher interest rates will only increase the cost of doing business for growing companies and may even force some to put parts of their expansion plans on the back burner.
Plug Power, Bloom Energy and Blink Charging are all still trying to build their customer bases, and none are profitable yet, so it is imperative that they not only grow revenue but also improve their margins to break even. An environment of high inflation and interest rates could make those tasks difficult.
However, investors in Plug Power have had another reason to worry.
Plug Power filed an auto shelf registration statement on June 8. This means the company can now sell a variety of securities to raise funds for the next three years, including common stock. A secondary issuance of common stock is generally viewed as a negative event for existing shareholders, as it dilutes the value of their shares.
Of course, it’s pure speculation for now, but investors often believe that such a presentation heralds an upcoming secondary issuance of shares.
In stark contrast, investor confidence in electric vehicle charging stocks such as Blink Charging rose on Thursday as the Department of Transportation announced the Biden administration’s intention to push for the construction of a 500,000 electric vehicle charger network in the US. , to be completed by 2030. The funding for that was part of Biden’s bipartisan infrastructure bill, which he signed late last year.
The president wants to make electric vehicle charging more accessible to all drivers, which should ideally encourage more people to buy electric vehicles. And as more electric vehicles are sold, the demand for electric vehicle chargers should increase, which is good news for companies like Blink Charging.
However, that optimistic outlook was not enough to allow investors to hold their heads high after seeing Friday’s gloomy-looking economic data.
Interestingly, all three of these stocks hit 52-week lows last month. Investors had hoped to see a rebound in stocks, but the latest CPI data dashed that hope for now.
As I mentioned earlier, Plug Power, Bloom Energy, and Blink Charging are loss-making businesses, and higher costs, whether from fuel, labor, or interest costs, are the last thing they want to see. Investors, therefore, may want to lower their earnings expectations for these companies for now. Instead, they should focus on their top-line growth. If revenues are steadily increasing, profitability shouldn’t be too far off.
From that point of view, Bloom Energy is in the lead. It expects to generate between $15 billion and $20 billion in annual revenue by 2031, compared to the $1 billion it generated in 2021. Plug Power is also growing its top line and forecasts $3 billion in revenue by 2025 in compared to its estimate of up to $925 million this year.
Blink Charging is a much smaller company, but it’s also firing on all cylinders, with revenue up 339% year-over-year in the first quarter to a record $9.8 million.