What happened
Electric vehicle (EV) charging and alternative-energy stocks lost ground in January amid sell-off pressure impacting the broader market. ChargePoint Holdings (CHPT -1.47%), EVgo (EVGO 0.57%), and FuelCell Energy (FCEL 12.97%) shares fell 27.3%, 17%, and 18.5% in the month, respectively, according to data from S&P Global Market Intelligence.
Between confirmation that the Federal Reserve will raise interest rates this year, a tense situation between Ukraine and Russia, and disappointing fourth-quarter reports from some high-profile companies, investors had a multitude of risk factors to consider last month. The S&P 500 and Nasdaq Composite indexes closed out the month down 5.3% and 9%, respectively, and many stocks with growth-dependent valuations suffered significantly larger pullbacks.
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So what
January's trading was shaped by rising macroeconomic risk factors. Federal Reserve Chairman Jerome Powell confirmed that the U.S. central bank was planning on raising interest rates in the near future, and the first of multiple rate hikes this year seems likely to arrive in March. Analysis from Bank of America and other sources points to the Fed potentially raising interest rates with each of its seven meetings this year.
In addition to rising interest rates creating a less favorable backdrop for growth stocks, rising Treasury bond yields and some mixed economic data also prompted investors to become more risk averse last month. With economic uncertainty on the horizon and the market taking a more cautious approach to valuations, there were some major analyst revisions last month. Shifting market dynamics and concerning Wall Street coverage weighed on valuations and contributed to double-digit sell-offs for ChargePoint, FuelCell, and EVgo.
J.P. Morgan's Bill Peterson published a note on ChargePoint stock on Jan. 28, upgrading his rating on the stock from neutral to overweight, but lowering his one-year price target on the stock from $26 to $20. Citigroup analyst Itay Michaeli published a note maintaining a neutral rating on the stock but lowering his one-year price target from $28 to $15. Both analysts liked the company's recent progress, but the market is generally taking a more cautious approach to valuing EV charging stocks at the moment.
Michaeli also published a note on EVgo on Jan. 31, in which he maintained a neutral rating on the stock but lowered his price target from $17 to $9 per share. As with his coverage on ChargePoint, Michaeli remained largely positive on EVgo's business performance and outlook, and the lowered price target reflected an updated approach to risk-reward dynamics and valuations.
KeyBanc analyst Leo Mariani published a note initiating coverage on FuelCell with a sector weight rating on Jan. 5. Mariaini didn't issue a price target on the stock and noted there was limited visibility on the company's near-term performance outlook and uncertainty related to its competitive position. Meanwhile, J.P. Morgan's Mark Strouse published a note on FuelCell on Jan. 20, maintaining an underweight rating on the stock and lowering his one-year price target from $7 per share to $5 per share.
Now what
ChargePoint, FuelCell, and EVgo shares have continued to lose ground early in February's trading.
The stocks have continued to make moves as the market has reacted to earnings from big tech companies. Disappointing earnings and guidance from Meta Platforms prompted a day of big sell-offs, but ChargePoint, FuelCell, and EVgo stock participated in the subsequent recovery after Amazon's better-than-expected Q4 results lifted the market.
FuelCell reported its own Q4 results at the end of December, so investors will have to wait for a couple of months for the hydrogen technologies specialist's next quarterly update. On the other hand, ChargePoint and EVgo will likely publish quarterly updates within the next month or so.
All three of these stocks have seen big sell-offs over the last year. Big valuation pullbacks set the stage for potential recovery trading, but investors could be left waiting for turnarounds without encouraging business updates or sustained rebound momentum for the broader market.
