Investing in the electric vehicle (EV) sector isn't for a conservative portion of your portfolio. But speculating on high growth can have a place in just about any investment plan. And investing in the infrastructure needed for all EVs might be easier than trying to pick the winners among vehicle manufacturers themselves.
That's not to say charging companies will all succeed, or that all are worth buying today. One way to narrow down favorites is based on market leadership, as well as how management has presented its future outlook. The top two based on market share are North American leader ChargePoint Holdings (CHPT -1.47%) and leading European provider EVBox, which will soon go public through a merger with SPAC TPG Pace Beneficial Finance (NYSE: TPGY). Below is a breakdown in more detail.
Image source: ChargePoint Holdings.
Breaking them down
Investors haven't been able to participate in ownership of charging-station network leaders until recently. Before companies in the sector became the targets of mergers with SPACs, one popular name with investors was Blink Charging (BLNK 2.17%). But larger and more established options are also now available to retail investors. Others with upcoming scheduled SPAC merger closings include EVgo: Climate Change Crisis Real Impact I Acquisition (CLII) and Volta: Tortoise Acquisition II (SNPR).
Some SPAC investor presentations attempt to predict revenue growth out several years. But with so much uncertainty involved, it would seem less relevant to consider estimates beyond this year. The table below shows these companies measured by 2020 revenue and 2021 estimates.
| Company | 2021 Revenue Estimate (millions) | 2020 Revenue (millions) |
|---|---|---|
| ChargePoint | $200 | $146 |
| EVBox | $145 | $84 |
| Volta | $47 | $25 |
| EVgo | $20 | $14 |
| Blink Charging | NP* | $6.2 |
DATA SOURCE: COMPANY FINANCIALS. *NOT PROVIDED.
Volta and EVgo are each focused on specific niche applications. Volta's chargers are placed in consumer destinations like shopping centers. This allows refueling to be done at a preferred shopping destination, rather than being the destination itself. Volta's stations include advertising monitors, giving the company another source of revenue, and aiming to allow commercial businesses to target incoming customers, adding value for the merchants.
EVgo calls itself only pure-play DC fast charger, owner, and operator. Fast chargers can fully recharge vehicles in under an hour, and in some cases under 30 minutes, compared to several hours for Level 2 chargers that use 240-volt power.
Both ChargePoint and EVBox have more established and diversified networks. EVBox has sold more than 235,000 charge ports, the most of any company. It is the leading charging network in Europe, and says it is "actively expanding in the United States," with a dedicated U.S. sales force and manufacturing facility in Illinois.
ChargePoint has more than 132,000 charging locations, and over 4,000 commercial and fleet customers. The company says it has more than 70% of the North American Level 2 network market. It also is already operating in 16 European countries. ChargePoint also has more than 2,000 publicly available fast-charging stations.
Diversified, but no guarantees
The business combination bringing EVBox public is expected to close in June 2021. TPG Pace Beneficial has submitted the registration statement on the merger confidentially to the Securities and Exchange Commission (SEC). Based on the valuation initially presented when the merger was announced, EVBox would have a market capitalization of about $1.4 billion at the current share price.
That makes EVBox clearly cheaper on a price-to-sales basis, as ChargePoint's market cap is approximately $6.5 billion. But with its registration statement remaining confidential, there is a question as to whether the initial merger announcement details will stand. Investors will know in about a month when the transaction is complete.
But regardless of the higher valuation, I think ChargePoint is the better buy right now. Being established in the U.S. and with growth already well under way in Europe, the company is well positioned. Its diversity of offerings may also be an advantage, as fast-charging and Level 2 networks will both have a place when EVs are more prolific. It remains to be seen what type of charging routine consumers will embrace most, so being diversified spreads those bets.
There is no guarantee that any charging network company will prosper. It's possible that auto manufacturers will attempt to maintain proprietary charging infrastructure similar to Tesla (TSLA 1.85%). That seems unlikely, though, because 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. And to have as vast a charging network as possible available for customers. And there is the possibility that the infrastructure evolves into a commodity with few margin growth opportunities. A basket approach may also be best in this sector, as it's still early and some should do well, while others may not. But for investors wanting to participate themselves, ChargePoint seems to be a good place to start.
