As President Biden's massive infrastructure bill proceeds through Congress, many investors have recognized that the proposed $7.5 billion investment in electric vehicle charging infrastructure it includes would represent a sizable opportunity for the companies already helping to keep the nation's EVs charged up -- companies like ChargePoint Holdings (CHPT 4.12%).
Since its founding in 2007, ChargePoint has grown to become a leading provider of EV charging infrastructure in North America and Europe. While a lot has changed for the company over the past 14 years, though, potential investors are keenly focused on the road ahead. So with that in mind, let's take a closer look at what ChargePoint expects over the next five years.
Image source: Getty Images.
Powerful prospects across the pond
Over the past decade, ChargePoint has emerged as a leader in North America, and while its presence in Europe, where it began to operate in 2017, is smaller, management isn't paying the continent short shrift.
"Continuing to expand in Europe is key to our vision for growth, reinforced by anticipated increases in charging," said CEO Pasquale Romano. Investors, therefore, can expect the company to pursue growth opportunities in Europe like its planned acquisition of has·to·be E-mobility, a leading European provider of software to manage charging stations. Once that transaction closes, ChargePoint will add 40,000 ports in operation (think pumps at a gas station) and 250,000 ports accessible through roaming partnerships to its current network of 4,700 ports and 175,000 roaming partnership ports.
While ChargePoint is committed to expanding through Europe, management doesn't believe that it will gain as large a share of that market as it has accrued in the U.S. On the recent fiscal Q1 2022 conference call, for example, management conceded that while the company has about a 70% market share of networked endpoints in the U.S., it only foresees growing its market share in Europe to about 25%.
A peek at the P&L projections
Management's enthusiasm about the opportunity to expand in Europe and maintain its lead in North America may stoke investors' excitement about the company's prospects, but what could really amp up investors' interest is what management sees in its crystal ball regarding the company's finances.
| Metric | Fiscal 2022 | Fiscal 2023 | Fiscal 2024 | Fiscal 2025 | Fiscal 2026 |
|---|---|---|---|---|---|
| Revenue guidance | $346 million | $602 million | $984 million | $1.43 billion | $2.07 billion |
| Gross profit guidance | $124 million | $225 million | $400 million | $591 million | $878 million |
| Operating expenses guidance | $226 million | $268 million | $321 million | $417 million | $542 million |
| Adjusted EBITDA guidance | ($93 million) | ($36 million) | $86 million | $178 million | $340 million |
Data source: ChargePoint Holdings.
Having reported sales of $146.5 million in its fiscal 2021, which ended Jan. 31, ChargePoint expects top-line growth of 136% in fiscal 2022. According to management's longer-term outlook, impressive growth will remain fairly constant over the next few years. If ChargePoint succeeds at achieving sales of $2.07 billion in 2026, it will mean that revenue will have risen at a compound annual rate of 70%, driven by growth in Europe and with its fleet customers.
While management expects the company to consistently generate a gross profit, it recognizes that it hasn't achieved economies of scale yet in Europe, contributing to its slim gross margin of 22% in 2021. Once it has expanded in Europe, however, management believes it can boost this considerably, forecasting a 42% gross margin in 2026.
Although ChargePoint doesn't provide a net income forecast, it has offered a sense of what it expects to generate in terms of adjusted EBITDA over the next five years. Here too, it expects to recognize margin expansion in adjusted EBITDA once it turns positive in 2024. The guidance is that it will generate a 9% adjusted EBITDA margin in 2024, which will widen to 16% in 2026.
How optimistic should investors be about ChargePoint's prospects?
Clearly, management is enthusiastic about ChargePoint's prospects over the next five years. Investors who are also bullish on the growth of EVs, however, should be a bit wary about how much credence they give to ChargePoint in terms of its ability to achieve its forecast targets.
The company faces strong competition from peers like Blink Charging, Volta, and EVgo -- all of which have also electrified investors' hopes. And ChargePoint only has a short history as a publicly-traded company. There's no guarantee that management will be able to successfully execute its growth plan under the scrutiny of the market. At this point, therefore, only investors with an ample tolerance for risk should consider adding this stock to their portfolios.
