ChargePoint Holdings (CHPT 2.12%) stock made a solid comeback in December, but it's failing miserably to hold up this year so far. Shares of the electric vehicle (EV) charging infrastructure company plunged to a 52-week low this week and were trading 13% lower as of 10:40 a.m. ET Friday this week alone, according to data provided by S&P Global Market Intelligence. The EV charging stock is now down almost 30% year to date.
With short interest as a percentage of float in ChargePoint stock rising further this week, it appears more and more people are turning bearish about the company's future. While short-term traders and speculators mostly drive short interest in a stock, a high and rising percentage of short interest could indicate widespread pessimism about the underlying company. In ChargePoint's case, the pessimism isn't unwarranted.
ChargePoint stock is getting shorted
ChargePoint stock is currently one of the most shorted stocks in the market, with its short interest rising to 26.4% this week as of this writing, up from 22% a couple of weeks ago.
ChargePoint is in turmoil. Its struggles have been evident as it has gone from growing its top line steadily to reporting a 12% year-over-year drop in revenue for its fiscal 2024 third quarter. The company also booked high inventory impairment charges last quarter, suggesting there may not be enough demand for its EV network charging systems. This comes at a time when the global EV industry is slowing down and competition in the EV charging space heating up, making it even harder for investors to build any conviction in ChargePoint stock.
NYSE: CHPT
Key Data Points
Data from China this week, for example, signaled a slowdown, what with new energy vehicle retail sales in the nation tumbling 21% during the first two weeks of January compared with the same period in December. New energy vehicles include all-electric, hybrid, and fuel cell vehicles.
Meanwhile, EV leader Tesla slashed the prices of its Model Y cars across Europe this week, just days after similar price cuts in China. Sentiment in the EV industry got another jolt some days ago when car rental giant Hertz Global announced plans to sell one-third of its EV fleet, or 20,000 EVs, in the U.S. and replace them with gasoline-powered vehicles.
These industry developments were bound to hit investor sentiment in ChargePoint, especially given that the company is already struggling to grow revenue, earning negative gross margins, and consistently selling stock to raise money to run its operations and invest in growth.
Should you buy or avoid ChargePoint stock?
The onus of putting ChargePoint back on track now lies on its new CEO, Rick Wilmer, who took the helm only a couple of months ago. Wilmer joined ChargePoint as its COO in July 2022.
Under Wilmer, ChargePoint last week announced a reorganization plan that includes laying off 12% of its workforce. The company expects the move to save roughly $33 million a year.
For now, ChargePoint is confident it will achieve positive non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) in the fourth quarter of calendar year 2024.
ChargePoint will provide more details about its reorganization program and growth plans for 2024 during its fourth-quarter earnings release, but that's not due until March. Expectations were already low, and ChargePoint is now also expected to book a restructuring charge of nearly $14 million in the fourth quarter. In short, there's little that could help this EV stock recover, at least in the near term.
