Not long ago, ChargePoint (CHPT 4.51%) was a hot company carving out its place in the promising electric vehicle (EV) charging market, looking to stake a claim to a healthy slice of a $100 billion market opportunity. The company's charging stations sprouted up nationwide, and its growth was hard to ignore.
The company's growth has slowed since then, and it faces some significant headwinds as its losses stack up. Since peaking in late 2020, ChargePoint stock has fallen by 95%. If you own ChargePoint stock or are considering adding it to your portfolio, consider the following first.
Reasons to buy or hold
ChargePoint's growth has been impressive. From its fiscal 2021 (which ended Jan. 31, 2021) through fiscal 2023, the company's networked charging systems revenue grew by 295%.
According to the Department of Energy, there are 55,000 charging stations with 141,000 ports (level 2 and level 3) in the U.S. ChargePoint operates a total of 56,000 ports across 31,000 locations, giving it the largest EV public charging network in the U.S., ahead of Tesla and Blink Charging. When you include its European assets, ChargePoint has over 286,000 ports.
According to consulting firm PwC, the EV charging market will have to grow nearly 10-fold to meet the needs of the projected 27 million EVs that will be on the road in 2030. It projects that the electric vehicle supply equipment market could grow from $7 billion today to over $100 billion by 2040 -- a 15% compound annual growth rate. If ChargePoint can hold its top position in the EV charging station market, its long-term upside could be massive.
Image source: ChargePoint.
Reasons to sell
Although ChargePoint has had a head start on building out its charging stations, the company faces significant headwinds as high interest rates and economic uncertainty have caused many commercial customers to cut back on spending.
Weaker consumer demand has also weighed on the EV industry's growth. Earlier this year, General Motors, Ford, and Tesla warned about slowing growth in EV sales, and the automakers have reduced prices and moderated their production growth in an effort to match demand. These headwinds have stunted ChargePoint's growth. During its 2024 fiscal year (which ended Jan. 31, 2024), its revenue from networked charging stations dropped by around 1%, and its net loss ballooned from $345 million in fiscal 2023 to $457 million.
Competition in the EV charging space is also heating up. Although ChargePoint operates more charging stations, many are level 2 chargers, which can take up to eight hours to fully charge an EV battery. Tesla, by contrast, operates 20,000 level 3 fast-charging ports, twice as many as ChargePoint, EVgo, and Electrify America combined.
Not only that, but in 2022, Tesla announced it would open up its charging technology, the North American Charging Standard (NACS), to other automakers. Since then, Ford, GM, Volkswagen, and other major automakers have partnered with Tesla to license its NACS ports on their vehicles.
CHPT Net Income (TTM) data by YCharts
Because its losses continue to build up, it is crucial for ChargePoint to secure more funding to continue growing its charging network. It has tapped into equity markets to raise capital, growing its share count by 38% and diluting its prior shareholders. At the end of its fiscal 2024, the company had $358 million in cash and cash equivalents on its balance sheet and a $150 million revolving credit facility.
Is ChargePoint right for your portfolio?
ChargePoint has a head start in the EV charging network market, and it aims to maintain and build on that lead. The company has explosive upside potential over the long term if it can navigate today's headwinds and outpace its competitors in expanding its charging station network.
However, investing in ChargePoint is a risky proposition. The company must keep expanding its network and will continue to rack up losses along the way. Not only that, but it's unclear when (or if) the company will become profitable. For those reasons, most investors should probably sell or avoid the stock until it becomes a more viable business.
