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Why ChargePoint Shares Rose Then Reversed Course Today

By Howard Smith - Jun 28, 2022 at 1:19PM

Key Points

  • A $2.45 billion valuation for Electrify America makes ChargePoint look relatively cheap.

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A big deal elsewhere in the EV charging space generated a short-lived pop for ChargePoint's shares.

What happened

Some big news Tuesday in the electric vehicle (EV) charging industry is making waves for related stocks. Global automaker Volkswagen sold a minority stake in its U.S. EV charging business, Electrify America, to industrial giant Siemens.

Among the ways traders reacted to that news was by bidding up the shares of EV charging network operator ChargePoint (CHPT 13.06%) by nearly 4% in early trading Tuesday. But as the trend in the overall market turned negative, ChargePoint shares reversed course and were trading 5.4% lower as of 1:30 p.m. ET.

So what

The Electrify America transaction looked like good news for publicly traded charging network names like ChargePoint on several fronts.

Electrify America is privately held, and the deal values it at $2.45 billion, reports The Wall Street Journal. The funding brought in from the sale will be used to expand EV home charging in the U.S. and Canada. The overall industry benefits from growing the infrastructure needed to support increased EV ownership. 

Now what

Perhaps more importantly for ChargePoint and other publicly traded charging network companies, the deal's valuation looks like good news relative to their current valuations. Electrify America intends to expand the number of charging stations it operates to 1,800 by 2026, according to the report. ChargePoint, which already claims more than 188,000 charging ports globally, has a market capitalization of under $5 billion.

That's a very reasonable comparative valuation based on the investment in Electrify America. The fact that two established industrial giants were involved in determining the value of that transaction also presumably lends credibility to the number they arrived at. For EV charging network companies, the task of attaining profitability remains a challenging one, and it will likely be some time before they achieve it. But Tuesday's news seems good for shareholders based on relative valuations. With the stock having given up its early gains from the news, long-term investors might want to take advantage of the dip.

Howard Smith has positions in ChargePoint Holdings Inc. The Motley Fool has positions in and recommends Volkswagen AG. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Chargepoint Holdings Inc. Stock Quote
Chargepoint Holdings Inc.
CHPT
$18.87 (13.06%) $2.18
Siemens Aktiengesellschaft Stock Quote
Siemens Aktiengesellschaft
SIEGY
$57.81 (2.26%) $1.28
Volkswagen Aktiengesellschaft Stock Quote
Volkswagen Aktiengesellschaft
VWAGY
$20.38 (0.35%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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