Shares of electric vehicle (EV) charging infrastructure and software company ChargePoint (NYSE:CHPT) are down 55% from their all-time high last December. Similar to other companies that have gone public via special-purpose acquisition company (SPAC) or de-SPAC in the past year, ChargePoint is part of a class of stocks that have dramatically underperformed the S&P 500's 20% year-to-date gain. 

Although it's a hypergrowth company in an attractive industry, there's an argument to be made that ChargePoint's stock price got a little ahead of itself. Now that it's at a discount, there's more room for upside for aspirational shareholders. Let's break down ChargePoint's performance so far this year to see whether the stock has become too cheap to ignore.

A woman charges her electric vehicle at home.

Image source: Getty Images.

Recovering from a tough year

Part of the reason ChargePoint's stock has come under fire could be its lackluster fiscal year (FY) 2021 performance. FY 2021 represents the 12 months ended Jan. 31 2021. The COVID-19 pandemic took a toll on ChargePoint, as the company generated $146.5 million in revenue in FY 2021, just 1% higher than the $144.5 million in FY 2020. 

ChargePoint's goal is to offer a comprehensive charging network and services for commercial customers, fleets, and passenger vehicles. Yet the reality is that commercial sales dominate its revenue mix, accounting for 75% of Q2 FY 2022 revenue. 

Commercial customers can include businesses and office parks that want to offer free or low-cost charging as a perk to their employees and customers. The problem is that this perk becomes a lot less enticing if folks aren't commuting to work or shopping in person, as was the case during the height of the pandemic. The shift to work from home could be permanent for many Americans, a trend that could prove somewhat of an issue for ChargePoint.

Scorching hot growth rate

Despite these headwinds, ChargePoint did an impressive job putting up a monster top-line figure of $97 million for the first half of FY 2022. Full-year guidance was just raised to a range of $225 million to $235 million, suggesting second-half revenue of around $130 million. If ChargePoint hits its goal, it would represent 57% revenue growth from FY 2021. 

ChargePoint has set some lofty revenue goals for the years ahead -- such as its target of nearly $1 billion in sales by FY 2025. Instead of speculating on the feasibility of that goal, let's focus instead on some positives the business is demonstrating right now.

One nugget from the company's Q2 FY 2022 earnings call from early September was management's commentary on workplace sales. ChargePoint reported that it's now growing faster on a quarter-over-quarter and year-over-year basis than it did in Q2 FY 2020. "Our business volume is now above pre-COVID levels, and our growth rate is above pre-COVID levels, but COVID is not over yet," said CEO Pasquale Romano on the company's Q2 FY 2022 call. "What we have seen is a mix shift due to COVID, but the overall growth in the space has been more than compensated for by the increased arrival rate in cars relative to the pre-COVID levels that we have seen. So, with all of that said, as workplace returns, it's all upside." In sum, ChargePoint is doing just fine even though many folks still aren't going back to the office.

The company models its revenue forecast based on the number of EVs hitting the road, not where or when people are charging. If ChargePoint is correct that the number of EVs on the road is what really matters when it comes to generating sales, then there's an argument that it could very well sustain a hypergrowth rate for years to come. ChargePoint said its model has proved accurate for the three quarters it has produced as a public company. That's a good start, but too short of a streak to garner much credit.

Diversifying the business

ChargePoint could stand a better chance at sustaining its high growth rate if it can diversify its revenue mix to include more residential and fleet sales. The good news is that both categories are showing signs of improvement. In the recent quarter, the residential segment was able to grow sales by 79% year over year. ChargePoint called out particular strides from multifamily housing as complexes look to offer charging for their residents. 

In August, ChargePoint announced it was acquiring ViriCiti, a fleet vehicle management provider. ChargePoint's fleet segment had a record Q2 by increasing billings by 187% year over year. Gaining competitive advantages in the fleet business could be game-changing for ChargePoint. From delivery vehicles such as those that United Parcel Service and FedEx use, to Waste Management's massive garbage trucks, to the needs of trucking and logistics companies, the transition from fossil fuels to alternative energy solutions looks to be a harder challenge for fleets than for passenger cars. However, the fleet segment has a lot of long-term upside if ChargePoint can establish itself as a leader early on and continue to land key partnerships. ViriCiti should improve ChargePoint's offering by letting customers monitor their operations data and gain visibility into fleet performance. 

The bottom line

ChargePoint stock's decline could present a buying opportunity for investors looking for an up-and-coming EV growth stock. Despite strong top-line growth, the company's path to profitability remains unclear. Management continues to prioritize revenue growth and customer acquisitions above positive cash flow or profitability, trusting that results will come with time as the industry matures.

ChargePoint's investment thesis could take years to play out, and the stock could be quite volatile in the process. But for investors willing to stomach the risks, ChargePoint looks like one of the better EV stocks on the market today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.