The first quarter of 2022 proved to be one of the most volatile quarters in recent U.S. stock market history as inflation issues combined with valuation concerns, rising interest rates, and ongoing supply chain constraints.
Despite all three major indices posting gains in March -- the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average all finished the quarter with their worst percentage declines since Q1 2020.
Electric car stocks and elective vehicle (EV) charging stocks were no different, with all major U.S. automakers, except for Tesla, losing to the market. However, even Tesla didn't match the gains of ChargePoint Holdings (CHPT -2.33%), which was one of the few unprofitable growth stocks that are not only beating the Nasdaq Composite year to date (YTD) but are actually up on the year. Here's why ChargePoint is crushing the market and remains an excellent long-term buy.
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Room to run
ChargePoint is all-in on the need for charging. The company is in the business of selling EV charging ports to residential, commercial, and fleet customers. Even as EVs improve and the 300-mile-plus range becomes the industry standard, ChargePoint still believes there is a lack of charging stations, especially in the U.S., to satisfy decades of increased EV adoption.
Image source: Statista.
ChargePoint isn't alone in its assessment. The Infrastructure Investment and Jobs Act includes $7.5 billion in charging infrastructure funding. But ChargePoint doesn't expect these benefits to kick in till calendar year 2023 (which is essentially its fiscal 2024). ChargePoint expects the funding to last for five years.
Even without that support, ChargePoint is guiding for fiscal 2023 revenue growth of 96% compared to fiscal 2022's year-over-year revenue growth of 65%. The fact that ChargePoint is expecting revenue to nearly double during a year when the EV industry, as a whole, is facing a lot of challenges is a testament to widespread optimism toward the need for more charging.
Situational awareness
ChargePoint reported its exceptional results and upbeat guidance during a time when the broader market was tumbling, volatility was high, and Wall Street seemed less interested in fundamentals and more focused on fear.
When the market keeps climbing higher, oftentimes, you'll see a company report mediocre or even poor results and guidance, but the stock will keep going up anyway. The reverse is true during corrections and bear markets, during which companies can report excellent results and guidance and see their stock price change very little. In this vein, investors can effectively get those good results and guidance for "free" -- so to speak. That seems to be the case for ChargePoint stock, which is now up 37% in the past month as investor optimism picks up, and folks seem to realize just how exceptional the business is performing right now.
Growth at warp speed
The EV charging industry is highly competitive. But ChargePoint separates itself from the crowd by being one of the most aggressive spenders out there. Its strategy isn't based on profitability but rather on building as many ports as possible and landing big customers early so that they will be lifelong partners with ChargePoint.
The company already considers over 50% of Fortune 500 companies its customers. ChargePoint believes that companies of that size prefer to work with one partner and that if ChargePoint has the largest network and provides the best value, it can grow its business with these companies as they seek more charging port benefits from their employees and customers.
High risk, high reward
Despite its potential, ChargePoint is a risky investment because it isn't profitable and is betting on an unproven industry. But for investors that believe in EV adoption and the need for charging, ChargePoint stands out as the best option in the space.
