ChargePoint Holdings, Inc. (NYSE: CHPT)
ChargePoint, which sells charging hardware and software and service subscriptions, is among the largest EV charging networks in the world with an unbeatable lead in the commercial level-2 chargers in North America. It generates most of its revenue by selling its charging systems to businesses, which either provide them to customers or use them to charge their own fleets. At the same time, the rest comes from subscription fees, which it collects from drivers who access its charging stations. With its recent successes, ChargePoint has seen an increase in mentions by 136% over the last day, prompting investors to wonder what makes the company gain so much hype. Currently, shares of ChargePoint trade at $17.64 each.
Positive Hype
There are multiple reasons why ChargePoint should be on your radar at the moment, some of them are as follows.
The recent news that $900 million has been approved to allow the majority of states to proceed with charging network expansion plans from funds provided by last year's Bipartisan Infrastructure Law is certainly a positive.
In its most recently reported quarterly period, the company grew revenue 93% year over year, and it expects to double revenue for the full fiscal year as well compared to the prior year.
ChargePoint's revenue only rose 1% in fiscal 2021, but it surged 65% to $242 million in fiscal 2022 (which ended this January) as it scaled up its charging network.
Last quarter, ChargePoint generated $108.3 million in total revenue, consisting of $84.1 million in charger sales, $20.2 million in subscription sales, and $3.9 million in "other" revenue, which consists mostly of environmental credit sales.
Starbucks announced a partnership with automaker Volvo and electric charging station company ChargePoint last month. The announcement includes a deal to install Volvo-branded electric vehicle (EV) charging stations made by ChargePoint along a 1,350-mile route from the Colorado Rockies to Starbucks' headquarters in Seattle.
As of the second quarter, ChargePoint had deployed over 200,000 charging ports, which management believes has given the company more than 65% market share.
Analysts expect its revenue to soar 99% to $482 million this year as even more businesses install EV charging stations.
Above all, ChargePoint expects 100% year-over-year growth in its third-quarter revenue and sees a solid second half of the year that should help it generate $450 million to $500 million in revenue for the year.
Negative Hype
Although the company has generated a lot of positive hype, there is still a reason to be cautious before taking a position in the company. Here is one of them.
ChargePoint lost more than $90 million in the last quarter and although net loss narrowed in fiscal 2022, it will likely remain unprofitable for the foreseeable future.
Conclusion
ChargePoint trades at 10 times that estimate, which is a surprisingly low price-to-sales ratio for a hypergrowth company with plenty of upside potential. Having seen an improvement in financials, and now with government assistance and the rapid increase in the number of charging stations, things look good for the company in the near future. Despite the downsides of profitability and a potential downturn in the economy, ChargingPoint might still pull through. With the recent fall in prices, it seems like a great time to take a position in ChargingPoint.
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