Is CHPT Stock Price Forecast To Rise?

Is CHPT Stock Price Forecast To Rise? ChargePoint is a leading provider of software and hardware solutions dedicated to the Electric Vehicle (EV) charging market. The company has over 4,000 customers, and plans to create 2.5 million charging ports by 2025.

ChargePoint Financials Improving

ChargePoint became the world’s first publicly traded EV charging company after its special purpose acquisition company (SPAC) deal with Switchback Energy Acquisition was completed in late-February this year.

The firm commands a huge 65%+ share of the EV charging market, with over 14,000 charging locations in North America and Europe alone. 

The company’s latest quarterly financial figures were encouraging. Revenue for the fourth quarter was reported at $42.4 million, which was down 2% year-on-year, but up 16% from the previous quarter.

Year-on-year revenues fell due to the impact from COVID-19, but quarter-by-quarter revenues have been increasing sequentially since Q1 FY21 to the current Q4 FY21.

However, despite the headwinds from the pandemic, full year revenues were actually up 1% at $146.5 million. Subscription revenue increased 40% annually, which helped offset a drop in network charging systems revenue from the effects of COVID-19.

Non-GAAP gross margin for the quarter was up from 20% last year to 22% this year. Yearly margin improved even more dramatically, from 13% to 23%.

Rex Jackson, ChargePoints’s Chief Financial Officer, believes that the strong performance of the subscription model, and a more profitable cost structure, is helping drive margins higher – this despite a year in which the business mix shifted to one with more lower margin, and fewer higher margin, products due to the coronavirus shutdowns.

Predicted revenues for the coming fiscal year are expected to grow by 37%, with an earnings per share increase from -$7.85 to -$0.39.

What Is ChargePoint’s Real Value?

The car manufacture market as a whole appears to have made the bold assertion that the future of mechanically powered vehicles is electric.

Industry analysts such as Bloomberg New Energy Finance predict that around 29% of all new vehicle purchases made in the United States and Europe will be electric by 2030, and that the charging infrastructure network needed to underpin this shift will constitute a market worth at least $190 billion. 

And the sales numbers already bear out this trend. Overall automobile sales dropped 16% during 2020, yet EV purchases were up just short of 50%.

This secular realignment of the motor vehicle industry is precisely the kind of development that will drive ChargePoint’s growth in the future.

The company proudly states that it is a pure-play business focused solely on the customer’s charging needs. The experience and expertise that ChargePoint brings to this endeavour rightly places it at the apex of the charging industry pyramid.

To estimate a fair market value for ChargePoint’s business, it helps first by taking a quick snapshot of its current cash position.

The company raised $480 million in its recent stock market float and now has $650 million in cash to fund further expansion. It should be noted that this cash reserve is greater than the company’s entire spend in the 13 years it’s been operational.

Furthermore, ChargePoint’s expansion plans are heavily focused on the European market. This makes sense.

Europe currently already has at least 600,000 charging points, more than double those in the US and the North America region, and Europe’s 500,000 EV sales in 2020 were twice that of its the previous year’s numbers.

European regulation is also weighted towards electrifying the automobile market, with lofty ambitions to have only EV cars sold by 2030.

So, to get a sense of ChargePoint’s price we can compare it to its closest rival, Blink. Blink has roughly an 8% share of the same market as ChargePoint, with a total market capitalization (MC) of $1.59 billion.

ChargePoint has an MC of $6.3 billion, with a market share of 65%, as mentioned earlier. This means that ChargePoint’s share of the market is over 8 times larger than Blinks, but only has an MC 4 times larger than its competitor.

This suggests that ChargePoint’s share price is undervalued by about a half that of Blink’s, indicting good upside potential for any investor.

Risks Of Investing In ChargePoint

Share price action has been somewhat volatile since ChargePoint’s merger and stock market launch, with a high of a little over $30 crashing to a current low of $20. A trading swing of over 33% in less than a month might make some investors nervous.

Of more concern for ChargePoint is the competitive nature of the EV market in general, and the EV charging market in particular. The reality is that this is an emerging sector and nowhere near fully matured.

Some industry pundits contend that the demand for EV automobiles is being sustained by government incentives, and that as a policy matter is sensitive to the political fashions of the day.

Also, the vehicle charging market lacks a moat, and ChargePoint’s first-mover advantage and high market share is not guaranteed and as such cannot be taken for granted going forward.

Is CHPT Stock Price Forecast To Rise?

ChargePoint has an enviable cash position and a solid plan to expand into the lucrative European EV market. Its post-float stock has witnessed some wild trading of late, but this might be expected to level out as price realization occurs over the coming months.

It is currently undervalued compared to its nearest peer in the charging space, and its market dominance makes it an attractive play in the wider EV sector.

If the company can deliver on its ambitious plans, then ChargePoint presents an attractive stock with plenty of upside over the long-term horizon.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.