The electric vehicle (EV) market is growing fast, and by 2030 an estimated 60% of new vehicle sales will be EVs, according to the International Energy Agency. Traditional automakers are moving quickly to release new electrified models, and there are more than a few EV start-ups that have their sights set on leading the electric car revolution. All of these new EVs will need a place to charge, and ChargePoint Holdings (CHPT 0.53%) is hoping that many of them get their electron fix from its charging stations in the coming years.
To better understand the company's potential and its hurdles, let's look at what's happening with ChargePoint right now and where it's headed in the next few years.
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What's happening with ChargePoint right now
ChargePoint is a leader in EV charging in the U.S. and has an expanding presence in Europe. The company ended the third quarter with 211,000 charging ports across both regions, an impressive 30% increase from the year-ago quarter. The company's sales are also moving in the right direction, with revenue climbing 93% to $125.3 million.
Management also issued strong guidance for its fourth quarter, with sales between $160 million and $170 million -- representing a 104% year-over-year increase at the midpoint. The company could also benefit from $5 billion in EV charger funding that was included in the infrastructure bill that was passed last year.
NYSE: CHPT
Key Data Points
Where ChargePoint will be in the next three years
Trying to figure out where a company will be in three years is nearly impossible. But if we look at what's happening with ChargePoint right now and combine it with what its management is expecting, we can get a better picture of where the company is headed. For example, management said that in its fiscal 2025, the company will have about $2.07 billion in annual revenue. That would be an increase of 726% compared to the company's $242 million in sales in fiscal 2022.
That's quite a jump, and it could prove to be a bit too optimistic. For one, ChargePoint is facing increased competition in the charging market, and its dominance in the U.S. likely won't be repeated in Europe. Management has said that it doesn't expect to have more than 25% market share in Europe, compared to about 65% share in the U.S.
Second, the EV market is facing some serious economic headwinds. High interest rates mean that cheap money has all but dried up. That's going to make it a lot harder and more expensive for ChargePoint to raise capital to expand its footprint. Lastly, higher prices have weighed on EV sales lately, which could result in slower demand for charging stations over the next few years.
While there's no doubt the automotive industry is at the beginning of a massive transition toward EVs, the next few years of adoption could be rocky if the U.S. and other leading economies experience a recession.
ChargePoint is a risky stock right now
While I think there's potential for ChargePoint in the coming years, investors should also be clear-eyed about how risky this stock is right now. The company is very unprofitable and likely will be for at least several more years. In the third quarter, ChargePoint's losses widened to $84.5 million, despite sales nearly doubling in the quarter.
The next few years will shed some light on ChargePoint's ability to grow its charging network, boost sales, and hopefully move toward profitability. But I think this stock might be better left alone until it can show that rising sales will translate into solid earnings.
