Will ChargePoint stock recover in 2022?
TThe US government surely believes that electric vehicles (EVs) are the future of transportation. Electric vehicles can make transportation much cleaner than it is today. To spur EV growth, the bipartisan infrastructure law calls for a $ 7.5 billion investment in EV charging infrastructure. The government aims to develop a network of 500,000 public chargers by 2030, which is a five-fold increase from the current number of public chargers in the United States.
Despite strong growth expected in the number of electric vehicles and chargers, stocks of electric vehicle charging providers fell in 2021. Leader in electric vehicle charging Charging points‘ (NYSE: CHPT) the stock fell more than 50% in 2021. Let’s see why this happened and if the stock will recover in 2022.
The rise and fall
While a 50% drop sounds alarming, it doesn’t sound so alarming when you consider that ChargePoint stock rose nearly 300% in the second half of 2020. ChargePoint stock is still up by around 50% from September 24, 2020, when the company first announced its intention to go public via After-sales service Switchback Energy Acquisition Corporation. By comparison, the stock has fallen more than 35% since ChargePoint went public in March of this year.
The euphoria surrounding EV stocks in early 2021 eased over the year as investors digested the risks and valuations associated with EV stocks.
ChargePoint is not yet profitable
Among the many challenges that electric vehicle charging companies face, achieving profitability is probably the first. In the third quarter, ChargePoint posted a net loss of $ 69.4 million, exceeding revenue by $ 65 million. The company does not expect to generate positive results EBITDA through 2024. ChargePoint is currently focused on revenue growth.
The company believes that as it builds a large customer base, it will be able to generate more recurring software revenue at high margin. While this plan makes sense, eventual profitability will likely depend on being one of the leading providers of EV charging with quality offerings and differentiation that will help customers stick with ChargePoint. There is a fair amount of uncertainty here.
There are several EV charging providers, both publicly traded and privately held, which can give ChargePoint stiff competition. The charging networks that some electric vehicle manufacturers have built or intend to build will also create fierce competition for the company.
Image source: Charging point.
ChargePoint is progressing well
ChargePoint has approximately 163,000 charging ports around the world, of which approximately 45,000 are in Europe. In the third quarter, the company increased its revenue by 79% year-on-year. It also raised its revenue forecast for the full year (ending January 31, 2022). Midway through, the company increased its revenue forecast from $ 230 million to $ 237.5 million.
While ChargePoint earns initial revenue from hardware sales, it generates substantial revenue from its software. Its software as a service model is expected to help it increase recurring revenue as hardware sales increase. The EV charging provider estimates that over time, the total recurring revenue of a typical EV charging unit, including software and service revenue, equals that unit’s hardware revenue. Overall, the company’s growth plans appear solid.
Is ChargePoint action a purchase?
The expected growth of electric vehicles and ChargePoint’s leadership position as an electric vehicle charging supplier is expected to support the company’s growth in the years to come. On the other hand, intense competition and loss-making operations are its main challenges.
ChargePoint stock is currently trading near its 52-week low, providing a more attractive entry point for investors looking to commit for the long term. But also note that the stock is still trading at a price-to-sell ratio of 27. If the company fails to grow as it hopes, the stock may take a further correction from here. Therefore, ChargePoint shares are only suitable for investors with a high tolerance for risk.
10 stocks we prefer over ChargePoint Holdings Inc.
When our award-winning team of analysts have stock advice, it can pay off to listen. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *
They have just revealed what they believe to be the ten best stocks for investors to buy now … and ChargePoint Holdings Inc. was not one of them! That’s right – they think these 10 stocks are even better buys.
* Returns of the portfolio advisor as of December 16, 2021
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.