It's probably a safe bet to say that many of the buyers of Dogecoin (DOGE 0.20%) did so because they are hoping the meme cryptocurrency will go "to the moon." But it's hard to make a real investment case for something that jumps -- or drops -- 26% in value in the course of a day's trading just because Elon Musk or Mark Cuban mentions it in a tweet.
Investors looking for a moonshot investment would be better served to take a flier on a company in a sector that promises to create a fundamental shift in an existing industry. Electric vehicle (EV) sales are expected to jump from 1.7 million in 2020 to 8.5 million just by 2025, and to 26 million 10 years from now, according to industry research provider BloombergNEF. And the firm expects EV sales to more than double again in the following 10 years.
Charging station network leader ChargePoint Holdings (CHPT 1.69%) is established in the business, and investors in this company could ride the explosive EV growth trend.
Image source: Getty Images.
De-SPAC results
ChargePoint went public on March 1 through a special purpose acquisition company (SPAC) merger. But unlike some de-SPAC companies in the EV space, the company has so far met its sales expectations and kept its future outlook unchanged. That's because it was already an established business before going public, with more than 4,000 commercial and fleet customers, and more than 132,000 charging locations on its network in North America and Europe.
There is, and will be, plenty of competition in this space. But ChargePoint exists as one of the largest compared to other domestic and international players. Past and estimated future revenue of several in the sector are shown below.
| Company | 2021 Revenue Estimate (million) | 2020 Revenue (million) |
|---|---|---|
| ChargePoint | $200 | $146 |
| EVBox | $145 | $84 |
| Volta | $47 | $25 |
| EVgo | $20 | $14 |
| Blink Charging | NP* | $6.2 |
Data source: Company financials. *Not Provided
ChargePoint is the current favorite
ChargePoint already has a large lead in North America with a 70% share of Level 2 charging networks, which use 240-volt power. Its comprehensive network of offerings also includes more than 2,000 publicly available fast-charging stations. Its suite of products caters to the needs of EV fleet owners, parking operators, and consumers, as well as corporations and municipalities.
And in a sign of how large the market can grow, President Joe Biden has proposed installing 500,000 new charging stations in the U.S. as part of an infrastructure initiative. He also intends to electrify bus fleets and government vehicle fleets. While ChargePoint supports the infrastructure package, and would almost certainly be a beneficiary of its passage, the company doesn't need that catalyst for its charging network to grow rapidly.
Image source: ChargePoint.
Investors should play the odds and think long-term
Betting on the EV sector is not a short-term strategy. But if the exponential global growth to more than 54 million vehicles by 2040 materializes, today's high valuations in the sector could eventually be more than justified. Just looking at the two with the highest and lowest 2020 revenue, respectively, the price-to-sales ratios are about 50 for ChargePoint, but 250 for Blink Charging (BLNK 1.59%).
A bet on the charging network sector has no guarantee of success, of course. It's possible that automakers will try to have proprietary networks similar to Tesla's (TSLA 2.07%) supercharger network model. But as automakers ramp up EV production, it would seem to make more sense for them to focus on what they know best, potentially including battery production.
For an investor wanting to speculate for big gains, charging companies have an established business in a quickly growing sector. Dogecoin keeps going up as Elon Musk or others excite retail trader interest. But if that's the only reason it's rising, it can't continue long term. A charging company like ChargePoint should have better odds at providing long-term gains.
