The electric vehicle industry is at an inflection point, which means the same holds true for the EV charging industry.
Bloomberg expects the number of electric vehicles sold to increase from 1.7 million units last year to 26 million units by fiscal year 2030. EV sales are further projected to increase to 54 million units by FY2040.
There are similar projections that point to accelerated growth for the EV industry. IHS Markit expects electric vehicles sales to increase at a CAGR of 52% over the next five-years. Deloitte estimates that electric vehicle sales will increase at a CAGR of 29% over the next decade.
However, this growth is unlikely to impossible without having a proper charging infrastructure. It’s therefore not surprising that EV charging stocks have been in limelight and are commanding premium valuations.
Let’s discuss four electric vehicle charging stocks that are worth considering as the industry growth can last beyond a decade.
- ChargePoint Holdings (NYSE:CHPT)
- Blink Charging (NASDAQ:BLNK)
- Tortoise Acquisition Corp. II (NYSE:SNPR)
- TPG Pace Beneficial (NYSE:TPGY)
Electric Vehicle Charging Stocks: ChargePoint Holdings (CHPT)
CHPT stock is among the top names to consider in the EV charging industry. After completion of a special purpose acquisition company (SPAC) business combination, the stock currently trades around $22.
Recently, Oppenheimer initiated coverage in the stock with a price target of $39. Therefore, there seems to be potential for significant upside from current levels.
For fiscal year 2021, the company reported revenue of $146 million, which exceeded the company’s guidance. It has guided for revenue between $195 and $205 million in the current fiscal year, implying 37% revenue growth at the guidance midpoint.
However, it’s worth noting that the company had a total cash buffer of $615 million after the merger. In the next few years, the number of charging ports shiped is likely to increase significantly. ChargePoint expects revenue to accelerate to $2.1 billion by FY2026.
Revenue is also likely to be more diversified in the next few years with software subscription and support revenue being recurring. As subscription-based revenue increases, there will also be a positive impact on margins. From 24% in FY2020, the company has guided for a gross margin of 42% by FY2026.
With the best part of growth still to come, CHPT stock is attractive among electric vehicle charging stocks. The stock has seen some correction in the last few days and it provides a good buying opportunity for the long term.
Blink Charging (BLNK)
BLNK stock has surged by over 2200% in the last year, but that does not make the EV charging stock overvalued. Analysts still have an average price target of $55 for the stock which is currently trading around $35.
Blink Charging has a more diversified product line offering both residential and commercial stations. The company also has several products under development that include media charging solutions, inductive charging bumper technology, among others.
With 24,000 EV charging stations, the company is already the second-largest charging-station operator in the U.S. It’s the potential growth in the next decade that the stock is discounting.
According to the company, electric vehicle sales in the U.S. are likely to increase from 1 million units in FY2020 to 3.3 million units in FY2025. Sales are further likely to increase to 13.0 million units by FY2030.
Specific to the company, analyst estimates point to 98.33% revenue growth for FY2020 on a year-on-year basis. For the current year, revenue growth is expected at 171.0%. I won’t be surprised if revenue growth is more than 100% for the next few years.
Tortoise Acquisition Corp. II (SNPR)
On Feb. 8, Tortoise Acquisition announced a SPAC business combination with electric vehicle charging infrastructure company Volta Industries.
Volta reported having 1,507 charging stations in FY2020. The company is expecting to increase the number of charging stations to 26,242 by FY2025.
With this growth, the company is expecting to increase revenue to $826 million in FY2025 from $25 million in FY2020. This would imply a five-year CAGR of 100%. SNPR stock had touched a high of $18.30 and currently trades at around $11. I believe the correction is a good opportunity to accumulate.
A reason to like Volta is the company’s differentiated approach to EV charging. One strategy is to have “sponsor-supported charging stations” that essentially act as advertising networks and enticements to stay and shop longer in sponsored locations. Since charging becomes effectively free, these electric vehicle charging stations have garnered attention.
Coming back to the financials, Volta Industries expects EBITDA of $252 million by FY2025, which would imply an EBITDA margin of 30%. Given the growth outlook and EBITDA visibility, a $1.4 billion pro-forma enterprise value does not look very expensive.
TPG Pace Beneficial (TPGY)
TGPY is another SPAC that has entered into a business combination agreement with an EV charging company. EVBox is a charging solutions platform for electric vehicles in Europe. As of the announcement of the business combination, EVBox had sold 190,000 charging ports.
The European Union has set a target for one million public charging points by FY2024. Further, the target is to increase the number of charging points to three million by FY2029. This presents a big opportunity for EVBox.
For the last year, the company reported revenue of €70 million. Revenue is expected to increase to €372 million by FY2023. The company is also expecting EBITDA break-even by FY2023. With an ambitious target for EV charging infrastructure in Europe, the company’s revenue growth is likely to be strong over the next five years.
The company’s business model is similar to that of ChargePoint. With an increase in the number of charging ports shipped, the company’s recurring software revenue will grow steadily. Therefore, EBITDA margin expansion is likely to be robust in the coming years.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored more than 1,500 stock-specific articles with a focus on the technology, energy and commodities sector.