There are more than 100 thousand publicly accessible electric vehicle (EV) chargers in the U.S. Yet the country lags China and Europe in terms of charging infrastructure. The number of public EV chargers in China is roughly eight times that of in the U.S. There is clearly immense potential for the development of public charging infrastructure in the U.S. to boost EV growth.
Lots of EV charging companies are hoping to benefit from this potential growth. Volta (VLTA 0.37%), which went public in August, is one such company. Let's take a closer look at its recent performance and long-term growth prospects.
Volta is growing its revenue fast
Volta has more than 2,000 charging ports installed in the U.S. at more than 800 station locations. In terms of number of chargers, the company's network is much smaller compared to ChargePoint (CHPT 3.76%) or Blink Charging (BLNK 2.33%).
Volta generates revenue from primarily two sources. The first is revenue from the sale of media display time to advertisers on its charging stations. The second is network deployment, which includes installation, operating and maintenance services, and the sale of Volta's charging products to its site hosts.
In the third quarter, Volta generated total revenue of $8.5 million. Nearly 87% of this came from the sale of media display time to advertisers while the remaining came largely from network deployment. Volta's total revenue for the quarter grew 77% over the year-ago quarter. The growth was primarily driven by increased sales of media campaigns with national brands.
By comparison, Volta's network deployment revenue decreased year over year. The company completed just eight customer-owned station installations in the latest quarter, compared to 61 completed in the third quarter of 2020. Notably, that doesn't mean slowing growth in the company's station network. Volta installed 158 new stations during the quarter. However, just eight of these are customer-owned, while the remaining are Volta-owned.
There are two ways to look at the change in Volta's revenue mix. First, site hosts aren't finding owning the installations attractive. Second, Volta can still increase its advertising revenue by adding more self-owned stations. This change also highlights the fact that the EV charging business model is still evolving and there is more than one way the companies could make it work.
The EV charging stock sports a high valuation
Based on the midpoint of Volta's estimated revenue range of $32 million to $36 million for 2021, the stock's price-to-sales ratio comes to around 55. That surely looks high for a loss-making EV charging start-up. However, that's comparable to the ratios for Volta's peers. ChargePoint stock is trading at a price-to-sales ratio of nearly 46 and Blink Charging's ratio is nearly 115.
Like Volta, ChargePoint is growing its revenue fast. In its fiscal quarter ended July 31, ChargePoint's revenue grew 61% year over year. The high price-to-sales ratios of these companies reflect expectations of high growth in the coming years. So, if the company's sales double -- which at the current rate will take a little over a year -- its price-to-sales ratio would fall to half. Of course, this assumes that the stock's price remains the same, though it will most likely rise if the company's sales continue to rise.
Apart from valuation, Volta's growth is in line with its peers ChargePoint or EVgo (EVGO 10.77%) in terms of revenue growth. Yet the business model for EV charging companies is still unproven. Which of these companies will attain sustainable profits remains to be seen. As such, stocks of EV charging companies, including Volta, include significant risks. That is something to bear in mind as you invest in Volta or any of its peers.