I am bullish on ChargePoint (CHPT) as it has a promising long-term growth runway, Wall Street analysts are overwhelmingly bullish on the stock, and the average price target implies substantial upside over the next year. That said, the company is far from profitable and faces potential competitive threats in the coming years.
ChargePoint is a company that offers cloud-based service packages through annual subscriptions. The open EV network offers its customers different services, including driver support, data, and payment processing.
Additionally, it serves a plethora of clients globally, including utilities, corporations, shopping centers, parking service providers, and municipalities.
Since its inception in 2007, the company has been focusing on making the fuel-free transition easier for various businesses and drivers. Now, ChargePoint customers can access thousands of places in North America and Europe with a single account. According to the company, over 98 million charging sessions have been claimed through its platform to date.
In this article, we will give two reasons why we are bullish on the stock here despite the risks involved.
Competitively Positioned Niche
In addition to its wide range of charging services which give it substantial networking and early mover advantages, ChargePoint has also shown relatively higher interest in acquisitions and mergers. For example, the company acquired Energised, a leading cutting-edge EV charging software platform.
Following the successful acquisition of Energised, the company moved forward with acquiring ViriCiti, which is a leading electrification solution provider.
With more than 150,000 ports accessible through the ChargePoint network, the company has become the biggest charging network in North America as well as Europe.
In Europe, the company has managed to create countless job opportunities, almost doubling its staff size. Between continued organic growth and M&A activity, ChargePoint should see robust growth for years to come.
In ChargePoint’s fourth quarter that ended in January 2022, the company displayed impressive 90% year-over-year growth. Its network charging systems’ revenue for the quarter was $59,165,000, also reflecting outstanding growth.
The company also reported that a major driver of its revenue growth was the European business, where approximately 51,000 ports were activated during the quarter.
Undervalued Stock Price
CHPT stock is difficult to value, as it is not profitable, trades at a high valuation multiple, and is growing rapidly. That said, it trades at an enterprise value-to-revenue ratio of 12.8 and expects to see revenue grow by 90.6% in 2023 and 57.7% in 2024.
Analysts expect the company to generate $0.80 per share five five years from now. That means that the company could generate massive upside as its growth momentum would like award it a high P/E ratio and therefore substantial share price appreciation.
At the same time, it also means that the stock is very speculative as it is likely several years away from becoming profitable on a GAAP basis.
According to Wall Street analysts, CHPT earns a Moderate Buy analyst consensus based on eight Buy ratings, four Hold ratings, and zero Sell ratings in the past three months. Additionally, the average analyst CHPT price target of $24.50 puts the upside potential at 31.4%.
Summary and Conclusions
ChargePoint benefits from an early mover advantage as well as a large and growing charging network in the high-growth EV space. If it can maintain its competitive positioning and continue to grow at a rapid pace, it could generate very attractive returns for investors at current prices.
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