ChargePoint (CHPT -22.49%) is at the leading edge of the electric vehicle (EV) transition. Although it doesn't make vehicles, it does provide the vital charging products and services that are needed for widespread adoption of EVs. It is an exciting story in many ways, but there's a small problem that investors need to understand before they buy it. ChargePoint is bleeding red ink, and there's no sign that this is going to change anytime soon.
What does ChargePoint do?
Without getting too deep into the technological woods, ChargePoint makes EV charging products and offers EV charging services. It is a picks-and-shovels type investment in the electric vehicle arena, since you need to charge an EV battery if you want to drive it. ChargePoint isn't as "sexy" as Tesla (TSLA -14.26%), which makes cars and charging systems (along with a host of other things). But ChargePoint is serving the broader EV ecosystem, which now includes electric vehicles from just about every major auto manufacturer.
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Given the ongoing shift away from carbon fuels, like gasoline, and government mandates around mileage and combustion engine vehicles, it seems highly likely that ChargePoint is serving a growing niche of the auto sector. As an example, the company recently highlighted the spending of its top 25 customers over time. In 2017, this group spent $5 million with ChargePoint in the first quarter. By 2023 that figure had grown to $83 million, an increase of 16 times.
Given that the penetration of EVs is still quite modest, at just under 10% in the United States, there's still a lot of potential growth ahead for ChargePoint. Indeed, as more EVs get sold, the need for charging will only grow. And, notably, the company sells solutions across the entire charging landscape, from home systems to chargers located away from the home and from consumer uses to business uses. It is in a prime position to grow with the broader EV industry. There's just one problem: It is still early innings in the EV transition.
ChargePoint is focused on technology
In September 2024, ChargePoint put out a document highlighting the importance of technological development in the EV charging space. According to the document, "ChargePoint is working across all market segments and all classifications of electric vehicles to remain the leader in charging innovation, developing products now for the future charging ecosystem." The technologies being advanced aren't really important; what is important is that ChargePoint is dedicated to being an industry leader on the technology front.
This is where the problem lies for the company when it comes to profitability. It is a young company working in a relatively new industry, so red ink on the income statement isn't shocking. That said, the dedication to research and development suggests that ChargePoint isn't going to get into the black anytime soon.
For example, in the fiscal second quarter of 2025, the company generated a gross profit of roughly $25.6 million. That was up materially from the previous year, but it spent $36.7 million on sales and marketing expenses, and another $15.1 million on general and administrative costs. Effectively, those two costs, together totaling about $51.8 million, are what are required to just run the current operation. With these two costs alone, ChargePoint is losing a huge amount of money.
What about all of that important research and development? The spending on that front was $36.5 million. That alone was well more than the gross profit the company generated. While sales and marketing as well as general and administrative costs are vital to the day-to-day operations of the company, ChargePoint is pretty clear that R&D is vital to its future success. In other words, there are really only so many options for cutting costs. ChargePoint needs to grow into its costs, which means that red ink is likely to be the name of the game for a long time.
ChargePoint is a high-risk investment
While ChargePoint has achieved a great deal in a short period of time, it is an stock that is most appropriate for aggressive investors. The opportunity ahead looks massive, but getting from today to a future that is driven by EVs is going to cost a lot of money. ChargePoint is a leader in the charging space today, but that doesn't mean it will still be a leader, or even exist, in the future if it can't find the cash it needs to keep spending on R&D, let alone the basic costs of running its business. And even if it can find the cash, the massive cost of R&D is likely to keep the red ink flowing for years to come.
