ChargePoint (CHPT 9.54%) started off with a host of positive bullet points when it reported fiscal second-quarter 2025 earnings results in September. The problem is that, once you dig beneath the surface, there are some troubling negatives to consider. And those negatives aren't likely to abate anytime soon.
If you buy ChargePoint below $2 per share, you are making an aggressive bet that this upstart can overcome material headwinds.
What does ChargePoint do?
ChargePoint's name is actually pretty descriptive. It is helping to build out the charging infrastructure needed to support broad electric vehicle (EV) adoption. It touches a lot of different pieces of the puzzle, including industrial charging gear, charging subscriptions, and charging technology that people use at home. The company is basically trying to cover the entire spectrum of needs with regard to EV charging.
Image source: Getty Images.
The company has a very large presence, too. Its footprint not only spans North America, but also reaches across the pond into Europe, where it operates in an additional 16 markets. If you were looking for a way to invest in EV infrastructure, ChargePoint is a pretty interesting way to do so.
And if you just looked at the bullet points from the company's fiscal second-quarter 2025 earnings release, you'd think things were going quite well. Some highlights include a revenue update, a gross margin update, a comment on the growth (21% year over year!) in subscription revenue, a note about costs going down (a 29% drop!), and guidance for third-quarter revenue.
When put into context, however, there are a lot of negatives here.
ChargePoint's results weren't all that great
For example, the company highlighted that revenue totaled $109 million, but left out the fact that this was down from $150 million a year ago. Clearly, the business isn't exactly thriving. And while subscription revenue did increase, which is good, the drop in network charging systems revenue more than offset that positive outcome in the quarter. Thus, the big overall drop in revenue.
To be fair, the gross margin of 24% was actually a positive. Notably, it continues an upward trend in this key profitability metric. However, here too, you need to consider some other factors.
For example, cost-cutting has been a key focus for the company, as it also highlighted. Operating a lean-and-mean business isn't bad, but ChargePoint is still in the early growth stage. Having to focus on cost-cutting at this point could end up hurting its growth prospects.
NYSE: CHPT
Key Data Points
Then there's the revenue projection for the fiscal third quarter of 2025 of between $85 and $95 million. This basically means management is telling investors to expect that the top line is going to weaken even further from the second-quarter showing. No wonder that management announced another round of cost-cutting when it announced earnings.
This brings up the bottom-line loss of $68.8 million. That was better than the year earlier, when it lost $125 million. But it is hard to get excited by yet another loss, even if that loss represents an improvement. ChargePoint isn't profitable, and it looks likely that there's going to be a lot more red ink ahead, even as management works to cut costs.
Notably, research and development alone was larger than its gross profit in the second quarter. That's an expense that it really can't skimp on if it wants to keep pace with the still-developing EV industry.
Is ChargePoint worth buying below $2 a share?
For most investors, ChargePoint is a gamble that's probably not worth taking. Yes, the company has achieved a great deal. But it has done so in a way that hasn't really benefited investors or created reliable earnings.
The goal appears to be building scale, but at some point, ChargePoint needs to make money. Only the most aggressive investors should be thinking about buying this stock below $2. That assessment could change if ChargePoint manages to start turning a profit, but until then, this stock looks like it is more of a high-risk gamble than an investment.
