Electric vehicle (EV) charging specialist ChargePoint (NYSE:CHPT) completed its merger with shell company Switchback Energy Acquisition last month. Since its merger, CHPT stock is down roughly 30% which presents an excellent opportunity to pick it up at a massive discount.
Following the completion of the deal, it is the world’s first listed electric vehicle charging company. Chargepoint currently dominates the sector with a more-than 70% market share and an aggressive expansion strategy to grow revenues to $1 billion in the coming years.
That said, CHPT stock is off to a terrible start so far in its short time as a public company.
As mentioned before, the stock is down around 30% this month, trading around $20 which is more than 70% lower than analyst price targets.
Additionally, its price metrics are significantly lower than its competitor in Blink Charging (NASDAQ:BLNK), which further suggests that the stock is undervalued. Let’s look at ChargePoint in more detail to understand its current positioning better.
Earnings and Future Outlook
ChargePoint released its fourth-quarter results earlier this month. They were marred by the pandemic’s effects as was expected.
Revenues of $42.4 million were slightly down from a year ago. A GAAP net loss of $90.7 million was significantly higher than the $33.8 million loss in the same period last year. The massive increase in its loss is attributable to a fair value difference in its redeemable convertible preferred stock warrant.
Revenues rose to $146.5 million for the full year, up just slightly from $144.5 million in fiscal 2020. Additionally, they came in slightly better than the management’s expectation of $135 million in revenues.
After the fiscal year in January, ChargePoint had $145 million in its reserves. However, after the merger, the company could have more than $600 million in cash to fund its future growth.
This year’s guidance calls for revenues to be between $195 million and $205 million. It expects revenues to take a hit during the first quarter due to seasonal factors. However, overall the outlook is in line with management’s previous forecasts at $198 million.
The future looks bright for ChargePoint at this time, boosted by government-led electrification mandates and the affordability of electric vehicles. It plans to increase its charging points to 2.5 million from just 54,000 in 2018. That number isn’t unreasonable considering how a Wood Mackenzie report predicts a total of 29.2 million charging stations by 2030 across Europe, China, and North America.
European Market Opportunity
One of the advantages that ChargePoint has over its competitors is its investments in Europe. It will use the proceeds from its merger to expand its activities in Europe.
This could prove an incredible advantage for ChargePoint considering the massive potential of the EV market in Europe. There are roughly 300,000 charging stations in the continent, which are 200,000 more than in North America.
Additionally, it is leading efforts to curb the electrification of automobiles. Europe witnessed a 137% increase in EV sales in 2020 despite a slowdown in overall car sales due to the pandemic. It led the world in EV sales, superseding China for the first time in five years.
Based on the Wood Mackenzie report, Europe will have 8.6 million EV charging outlets by 2030. Charger installations are likely to increase dramatically in 2021 as we get closer to a post-pandemic reality.
The Bottom Line on CHPT Stock
ChargePoint holds the lion’s share of the ever-evolving EV charging and infrastructure industry. It is expanding rapidly to take advantage of the rise in EV sales across the world.
Despite the hiccups during the pandemic, it should pick up the pace again this year and lay the foundation for sustainable growth in the future.
Moreover, it’s trading at a significant discount to its peers, which makes it an even better investment at this time.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.