ChargePoint Holdings (CHPT) is a high-growth company with competitive positioning, thanks to its large network. However, the company is nowhere near profitability, and is priced expensively right now. As a result, I am neutral on the stock.
ChargePoint has been developing innovative EV products since 2009. This helps organizations manage EV adoption while decreasing costs per mile driven, through more efficient use of EVs as part-time or full replacements for gas-powered fleets of vehicles. (See CHPT stock charts on TipRanks)
ChargePoint's Strengths
Founded in 2007, ChargePoint has built one of the most comprehensive EV solutions available and has been recognized by Switchback Capital as “the world’s leading EV technology and service provider.” Its solutions target a wide range of end users, from businesses requiring complete fleet management, to individual EV drivers.
ChargePoint now has the resources necessary to bolster its position in existing markets, as well as fund European growth.
Recent Results
Evolving from a regional to global company, ChargePoint is the top charging brand in North America. The company has also been making moves into the European market in 2021.
ChargePoint released its Q1 Fiscal Year 2022 earnings on June 3, revealing $40.5 million in revenue for the quarter, a 24% year-over-year growth. The company is expecting revenues of $46 million to $51 million in Q2.
The company should be able to continue investing aggressively in long-term growth, thanks to cash reserves of $610 million, as of April 30, 2021.
ChargePoint's Valuation
While ChargePoint enjoys a lengthy growth runway, it still needs to grow into its valuation. The company trades at a hefty 28.6x its forward revenues, and is nowhere near profitable. The company is still expected to be generating significant losses in 2022 and 2023.
On the bright side, revenue is expected to grow by 39.5% in 2022, and 66.2% in 2023. However, the company’s failure to generate positive EBITDA -- much less GAAP profitability -- based on 2023 projections, makes it a very risky bet.
Wall Street’s Take
From Wall Street analysts, ChargePoint earns a Strong Buy consensus rating, based on seven Buy ratings, one Hold rating, and zero Sell ratings in the past three months. Additionally, the average CHPT price target of $35.75 puts the upside potential at 58.6%.
Summary and Conclusions
ChargePoint has a lot going for it. Namely, its significant network advantage, and cash on hand, both of which are being leveraged to pursue further growth investments.
That said, the company is far from profitability, and is not expected to get there in the foreseeable future.
While Wall Street analysts are overwhelmingly bullish on the stock, investors should keep the lofty valuation and lack of profitability in mind. While it might be worth opening a position in the stock here, investors should view it as a speculative investment.
Disclosure: On the date of publication, Samuel Smith had no position in any of the companies discussed in this article.
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