What happened

EV charging network company ChargePoint Holdings (NYSE:CHPT) has pretty much fallen out of favor with investors. Even after a big down month in December, when the stock dropped about 25%, shares in ChargePoint continue to fall. As of Friday-morning trading, the stock has had another bad week, with shares down over 14% according to data provided by S&P Global Market Intelligence.

So what

ChargePoint is a leading EV charging company in North America and is expanding in Europe. It has become one of the few EV companies going public through SPAC mergers to follow up with increasing revenue projections. The company has raised its calendar year 2021 annual revenue guidance in each of the past two quarterly reports.

EV driver parked at ChargePoint charging station.

Image source: ChargePoint Holdings.

But investors are focusing more on the macroeconomic picture in 2022, with expectations of future revenue growth being offset by a shift in the Federal Reserve's policy plans to battle inflation. If inflation persists, the value of future revenue and earnings will be hurt. That seems to be driving names like ChargePoint lower. 

Now what

This week's stock drop doesn't come with any current news from the company. ChargePoint provides electric fueling networks for commercial, fleet, and residential customers. It reported 79% year-over-year revenue growth in its recently reported fiscal 2022 third quarter, ended Oct. 31, 2021. That allowed it to raise revenue guidance for the second time in six months for its full fiscal year. But investors focused more on the bottom line, which showed a growing net loss for the period. 

ChargePoint is spending more to grow out its hardware network of charging stations. It hopes that will lead to a growing stream of recurring revenue from its software. The company did report its gross margin grew to 25%, a jump of 500 basis points versus the prior-year period. That came from product cost improvements and from acquisition impacts. 

Investors interested in this stock should enter it with a long time horizon and the knowledge that it remains speculative. Success will rely both on significant growth in EV demand and on the ability to convert the hardware into reliable recurring revenue. For those with that outlook, the shorter-term drop based on the macro environment might make the recent downtrend look like an appealing entry point.

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.