With cheaper value stocks returning into favor and investors booking profits, the entire EV sector has lagged in 2021.
This has made major players like Tesla (NASDAQ:TSLA) struggle to find their mojo. However, when it comes to EV charging stocks, ChargePoint (CHPT) has garnered major attention lately.
Incorporated in 2007, ChargePoint Holdings has constructed one of the biggest EV charging networks in the world. CHPT has three lines of business. These are Residential Products, Commercial Products, and Fleet Products. From these three, the company earns funds from recurring revenues relating to the company's software, labor and parts services, and hardware.
CHPT can be seen as a relatively overlooked EV play that has a niche following. Indeed, there's reason to be bullish on this stock. However, this is a stock that's remained quite expensive, despite a decline of more than 60% from its peak. Accordingly, I remain neutral on CHPT stock.
That said, let's dive into what's driving so much bullish sentiment with CHPT stock of late. After all, any stock that's fallen this far from its peak is worth a look from growth investors. (See Insiders’ Hot Stocks on TipRanks)
EV Infrastructure Outlook
With drivers rapidly making the switch to EVs, electrification is certainly an undisputed catalyst. However, most EVs can only travel 125 to 250 miles on a single charge.
While this range is getting better, charging stations are a much-needed reality for EV owners looking to make longer road trips.
ChargePoint is leading the way in taking care of this pain point for EV owners. The company's 30,000 charging spots is absolutely incredible. For those bullish on the rapid adoption of EVs globally, ChargePoint has become the top EV charging stock to consider.
Projections for growth in investment in EV charging infrastructure remain extremely bullish. The cumulative EV charging infrastructure investment in Europe and the U.S. is anticipated to be $192 billion by 2040, and $60 billion by 2030.
Dozens of cities, and 10 European nations, are planning to ban sales of new internal combustion engine automobiles by 2035. On the other hand, U.S. automakers are anticipating that roughly 50% of their automobile sales will be electric by 2030. Moreover, EVs are projected to be accountable for about 10% of all automobile sales by 2025.
While it's estimated that EVs only comprise around 2.6% of the total vehicle market as of 2019, expectations are that this number could balloon to approximately 30% of vehicular sales in 2030 in Europe and the U.S.
Should this projection become a reality, a massive connected network of EV charging stations will be essential. Accordingly, ChargePoint looks to be a company leading the way in this hyper-growth space.
ChargePoint's Fundamentals Look Strong
Strong growth has already been reflected in the company's in the company's recent earnings report. The company posted revenue growth of 61% on a year-over-year basis.
Additionally, network charging revenue rose by 91% to hit $40.9 million. On top of this, ChargePoint ended the second quarter with $618.5 million in capital to be deployed. Much of this capital is related to the company's recent IPO.
These numbers have led Wall Street analysts to suggest that CHPT stock could double once again. Of course, how ChargePoint utilizes this capital to provide a return for shareholders remains to be seen.
However, the company remains bullish on its revenue expectations. The company has announced forward revenue expectations between $60 and $65 million for the coming quarter. That would represent a quarter-over-quarter increase of 7% to 15.9%.
Wall Street's Take
According to TipRanks analysts rating consensus, ChargePoint Holdings is a Moderate Buy. Out of 11 analyst ratings, there are seven Buy recommendations, three Hold recommendations, and one Sell recommendation.
The average ChargePoint price target is $34. Analyst price targets range from a high of $46 per share, to a low of $24 per share.
Bottom Line
ChargePoint is a company with a tremendous growth outlook. Of course, this growth outlook needs to be priced appropriately. Over the past few months, it appears the market has determined there's been too much exuberance factored into this company's stock price.
However, at these levels, it's understandable why some aggressive growth investors may want to consider this stock.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.
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