After soaring from $10 to $50 per share, ChargePoint (NYSE:CHPT) stock has pulled back substantially since this former SPAC (special purpose acquisition company), closed on, and took the name of, its merger target. As a leading provider of EV (electric vehicle) charging solutions, there’s no doubt of this company’s bright future.
The issue, though, is how much of its long-term potential has already been factored into its stock price. If the pivot to electric-powered vehicles happens sooner than expected, this “story stock” could start moving back toward its all-time highs.
If the large-scale shift happens over a longer timeline it certainly won’t result in higher prices. Even so, underwhelming results may do little to push the stock lower from here.
As the Biden administration has yet to fully roll out its aggressive EV policy, there’s a major catalyst that’s still in play. The specter of the U.S. government taking an active role in pushing for electrification may be enough to keep shares steady at today’s prices.
If you’re bullish on EVs in the long-term, it may be worth it at today’s prices. If you’re looking for a quick trade based on recent trends, however, this likely isn’t what you’re looking for.
CHPT Stock Could Hang Tight at Today’s Prices
According to the charts, ChargePoint stock seems set to trend lower. Yet, there could be enough in play to keep shares steady at or near today’s prices. Namely, the Biden administration’s ambitious plans to build out America’s EV infrastructure by 2030. This plan calls for the building of 500,000 EV charging stations over the next nine years.
Sure, it’s not guaranteed this large-scale infrastructure investment will even happen in its entirely. As some skeptics have pointed out, there may not be enough rare earth metals in friendly hands to allow a rapid shift over to EVs. However, it’s not the end result that matters for those long CHPT stock right now.
It’s the prospect of further developments with Biden’s green agenda. As long as there’s the possibility of federal government largesse helping to bolster the demand for this sector, it may be enough to keep this one steady at today’s price levels.
While this could help stabilize ChargePoint stock, it’s far from enough to help give it a jump start. As concerns and uncertainties weigh down on the stock, don’t expect a rapid bounce back anytime soon.
Why a Short-Term Rebound Likely Isn’t in the Cards
Per its own projections, in the next five years ChargePoint could scale into a highly profitable business. As I discussed on March 8, by fiscal year ending January 2027 its sales could be over $2 billion and its annual adjusted EBITDA could top $340 million.
Yet, at around $24 per share, this future growth is more than factored into the CHPT stock price. This has been typical with SPAC stocks over the past year. However, as we start seeing actual results, investors may continue to reassess the sky-high prices they’ve assigned to hot names in this sector.
The pandemic has continued to affect results for ChargePoint. That’s understandable, and most are aware of this factor. Year over year, sales were up only slightly, at $146.5 million for FY21 (year ending January 2021), versus $144.5 million in FY20.
For this fiscal year, the company’s guidance calls for $195 million-$205 million, basically assuming a post-pandemic recovery will help it get back into growth mode. However, if more signs point to it falling short of this sharp revenue rebound, we may see another round of downward pressure on shares.
Another major concern is competition. As InvestorPlace’s Chris MacDonald discussed, rival early-stage EV charging companies could make this a crowded market, making it tough for this company to raise its margins as expected.
This is on top of the risk that EV automakers, like Tesla (NASDAQ:TSLA) and Volkswagen (OTCMKTS:VWAGY), who are building their own charging networks, could muscle third-party operators like ChargePoint out of the business.
Bottom Line: If You’re Bullish, Patience Is Key
With more bullish news for electrification via future government action possibly on the horizon, there’s likely still enough at play to keep ChargePoint charged up at today’s prices. Investors are starting to factor in more of its uncertainties into its share price.
Shares may hold steady from here, making it a worthwhile buy for those intending to hold it for years. Those looking for a quick EV-related trade should onsider other opportunities out there with shorter time horizons.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.