EVgo (EVGO 9.34%), a leading builder of electric vehicle (EV) charging stations, has burned plenty of investors. It went public by merging with a special purpose acquisition company (SPAC) in July 2021, and its stock opened at $15.05 on the first day.
But today, EVgo's stock trades at about $3. The market's initial excitement fizzled out as EV sales slowed down, more competitors carved up the market, and interest rates rose. Could this out-of-favor stock bounce back over the next 12 months?
Image source: Getty Images.
What happened to EVgo over the past few years?
EVgo was created in 2010 as part of a settlement between NRG Energy and the California Public Utilities Commission in the aftermath of the Enron scandal. NRG was ordered to invest $100 million to create an EV charging network, and that business evolved into EVgo through a series of spin-offs and sales.
Prior to going public, EVgo claimed it could grow its revenue from $20 million in 2021 to $166 million in 2023. It actually came close to hitting those top-line targets: Its revenue rose from $22 million in 2021 to $161 million in 2023.
Today, EVgo operates over 1,000 fast charging stations in more than 65 metropolitan areas across 40 states. Its drivers can pay for each charge individually, or they can sign up for its discounted subscription plans, which start at $6.99 a month.
However, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) broadly missed its initial expectations. It originally expected its adjusted EBITDA to turn positive by 2023, but the figure came in at negative $59 million.
All of that red ink indicated EVgo could struggle to expand in the increasingly crowded EV charging market. Its toughest competitors include Tesla, which has made its Superchargers compatible with more third-party vehicles, and ChargePoint, which operates a larger network of charging stations. EVgo kept pace with most of those competitors with some help from its top partner, General Motors, which tethers its EVs to its network.
NASDAQ: EVGO
Key Data Points
What could happen to EVgo over the next year?
We can gauge EVgo's growth through its charging stalls in operation, its combined network throughput as measured in gigawatt-hours (GWh), and its total customers. Over the past year, it brought more stalls online, increased its charging power, and gained more customers. Its adjusted gross margin also held steady as its adjusted EBITDA margin improved.
|
Metric |
Q3 2023 |
Q4 2023 |
Q1 2024 |
Q2 2024 |
Q3 2024 |
|---|---|---|---|---|---|
|
Stalls in operation |
2,740 |
2,990 |
3,240 |
3,440 |
3,680 |
|
Network throughput |
37 GWh |
50 GWh |
53 GWh |
66 GWh |
78 GWh |
|
Total customers |
785,000 |
884,000 |
981,000 |
1.0 million |
1.2 million |
|
Revenue growth (YOY) |
234% |
83% |
118% |
32% |
92% |
|
Adjusted gross margin |
26.4% |
26.5% |
31.3% |
26.5% |
26.6% |
|
Adjusted EBITDA margin |
(40.6%) |
(27.9%) |
(13.1%) |
(12%) |
(13.2%) |
Data source: EVgo. YOY = year over year.
For the full year, EVgo expects its revenue to rise 55%-65% to $250 million-$265 million as its adjusted EBITDA improves from negative $59 million to negative $32 million-$28 million. It's maintained that steady expansion even as the EV market cooled off and rising rates chilled the market's demand for new EV charging stations.
For 2025, analysts expect EVgo's revenue to grow 41% from that midpoint to $362 million with a positive adjusted EBITDA of $7 million. For 2026, they expect its revenue to rise 33% to $479 million as its adjusted EBITDA surges to $50 million. With an enterprise value of $268 million, it looks dirt cheap at less than 1 times this year's sales.
Are brighter days ahead for EVgo?
Investors should take those estimates with a grain of salt, but EVgo's prospects should brighten as the macro environment warms up. It also won't go bankrupt anytime soon: It ended its latest quarter with $153 million in cash, cash equivalents, and restricted cash, and it secured another $1.25 billion loan facility from the U.S. Department of Energy (DOE) last December.
Yet dilution remains a major headwind for EVgo. It's increased its number of outstanding shares by 90% since its public debut, and its top investor (EVgo Holdings, an affiliate of LS Power Equity Partners) recently priced a sale of 23 million shares at $5 a share. Insiders also sold over twice as many shares as they bought over the past 12 months.
But despite those near-term challenges, EVgo still expects the warming market, its partnership with GM, and the financial support from the DOE to help it triple the size of its EV charging network by 2029. If it can achieve that lofty goal and meet analysts' expectations for a positive adjusted EBITDA, the stock could soar much higher.
So where will EVgo's stock be in a year?
Evgo's stock could remain out of favor for now as investors fret over elevated interest rates and the sluggish growth of the EV market. Its ongoing dilution and insider sales could exacerbate that pressure. Nevertheless, I believe it could soar a lot higher in a year as the market finally stabilizes and it continues to expand its EV charging network.
