ChargePoint (CHPT +5.91%) went public by merging with a special purpose acquisition company (SPAC) three years ago. At the time, the leading builder of electric vehicle (EV) charging stations impressed investors with its explosive growth rates.
Yet ChargePoint's stock has lost more than 90% of its value since its public debut. It ran out of juice as its growth cooled off; it racked up steep losses; and rising rates compressed its valuations. The abrupt departures of its CEO and CFO last November raised even more red flags. But could this out-of-favor stock recover over the next three years?
Image source: Getty Images.
Why did the bulls abandon ChargePoint?
ChargePoint is the largest builder of EV charging stations in North America and Europe. As the EV market expanded, its revenue rose 65% in fiscal 2022 (which ended in January 2022) and soared 94% in fiscal 2023.
But in fiscal 2024, its revenue grew a mere 8% to $507 million. Its growth decelerated as the EV market cooled off, and the macroeconomic headwinds prevented companies from installing new charging stations. It also faced fierce competition from Tesla's expanding network of Superchargers, which are compatible with other brands of EVs, and other smaller EV network builders like Blink Charging.
ChargePoint's adjusted gross margin plunged from 20% in fiscal 2023 to 8% in fiscal 2024, while its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss widened from $217 million to $273 million.
Those are grim numbers for a company that ended the year with just $327 million in cash and equivalents with a high debt-to-equity ratio of 2.4. Its share count has also increased by nearly 40% over the past three years as it raised more cash through secondary-share offerings. Even as its stock price plunged 77% over the past 12 months, insiders still sold more than six times as many shares as they bought.
NYSE: CHPT
Key Data Points
What's the contrarian case for ChargePoint?
It's easy to see why the bulls abandoned ChargePoint: Its business won't recover anytime soon, and it expects its revenue to decline 19% year over year in the first quarter of fiscal 2025 as the EV market's downturn continues. The softness of its commercial vertical (64% of its billings in the fourth quarter of fiscal 2024) will likely continue to offset the stronger growth of its fleet (18%) and residential (15%) verticals.
But looking ahead, ChargePoint expects its business to stabilize in the second half of fiscal 2025 as the EV market warms up, it resolves its inventory issues, and it expands its Asia-based manufacturing operations. It also expects its adjusted EBITDA to turn positive in fiscal 2025's Q4. For the full year, analysts expect its revenue to grow 8% to $548 million as it narrows its adjusted EBITDA loss to $123 million.
Based on those estimates and its current enterprise value of $813 million, ChargePoint's stock looks cheap at 1.5 times this year's sales. Its rival Blink Charging, which faces many of the same headwinds, trades at 1.6 times this year's sales.
Where will ChargePoint's stock be in three years?
Fiscal 2025 will be a challenging year for ChargePoint, but analysts seem optimistic regarding its future. They expect it to return to double-digit revenue growth in fiscal 2026 and 2027 as its adjusted EBITDA and free-cash-flow (FCF) margins turn positive.
|
Metric (Analyst Estimates) |
FY 2025 |
FY 2026 |
FY 2027 |
|---|---|---|---|
|
Revenue growth (YOY) |
8% |
33% |
22% |
|
Adjusted EBITDA margin |
(22%) |
(3%) |
6% |
|
FCF margin |
(16%) |
0% |
6% |
Data source: Marketscreener. YOY = Year over year.
Investors should take those estimates with a grain of salt, but ChargePoint has already established an early-mover advantage in the EV charging space with more than 286,000 active ports under its management in North America and Europe.
If it maintains that lead and continues to expand its network, its business could recover quickly as the EV market stabilizes. If that happens, its stock could head much higher over the next three years. Assuming it matches analysts' expectations and trades at a reasonable 5 times sales in fiscal 2027, its enterprise value could reach $4.4 billion, which would represent a five-bagger gain from its current valuations.
That said, investors should be aware that ChargePoint still has a lot to prove. If it fumbles again, its stock could easily plunge even further as investors dismiss it as another SPAC-backed EV player that shouldn't have gone public.
