Does it make sense to invest in ChargePoint Holdings (NYSE:CHPT) stock now? After all, since becoming the world’s first publicly traded global EV charging network stock, it has dropped.
To be fair, ChargePoint simply got in at the wrong time. ChargePoint opened for trading under its new CHPT ticker after blank check company Switchback Energy took it public on March 1. The company raised $80 million from the transaction, but that figure would have been much higher just a month prior.
The markets are undertaking an EV sell-off. The EV confidence that characterized the markets in 2020 and into 2021 has faded in the last month or so. The once unflappable Tesla (NASDAQ:TSLA) has seen its share price drop 17% in the last month. ChargePoint fell 28% in the same period.
But unless someone suddenly proves that EVs were a flash in the pan, ChargePoint still has a lot going for it.
ChargePoint Is Like an ETF
With the electric vehicle industry exhibiting tremendous growth, one of the easiest strategies might be simply invest in an ETF geared toward the industry.
One research report indicates that EV total market value should rise to $700 billion by 2026, up from $140 billion in 2019. And Allied Market Research pins the value of the EV industry at $800 billion by 2027. Both reports imply the same 22% compound annual growth in the next seven years.
Investors who’d like to get on board with that projected growth without the inherent risk in picking a particular company have two choices. They can invest in an EV ETF like Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV) or iShares Self-Driving EV and Tech ETF (NYSEARCA:IDRV).
Or they can invest in CHPT shares. The three are similar in that they should scale with the growth of the EV industry. A given EV manufacturer may fall out of favor in the coming years, but a brand agnostic charging network will not.
Earnings at a Glance
ChargePoint announced Q4 and full fiscal year 2021 results on March 11. Revenue fell by 2% in the quarter to $42.4 million, with a loss of $33.6 million compared to $32.5 million in the same quarter a year ago.
For the full year, Chargepoint said recorded revenue of $146.5 million, which was a slight increase of 1.4% from the prior year. Losses also improved from $129.9 million in 2019 to $117.8 million in 2020.
Chargepoint guided for revenue in the first quarter of $35 million to $40 million, and full-year revenue of $195 million to $205 million. That would be a gain of about 36% from last year.
I don’t put a lot of stock in the Street’s short-term reaction to the results. EV bears will say the company is losing too much money, while EV bulls will celebrate the improvement from 2019. Either way, the industry growth projections still hold true for the upcoming decade.
It’s the longer term that’s important for the company, as Chargepoint projects $2.069 billion in 2026 revenues.
At year end ChargePoint recorded a loss of close to $5 million. It’s no secret that the company loses money. But I expect that few people believe that the company has poor long-term prospects. Five million dollars is a drop in the bucket in the grand scheme of things. ChargePoint is still very, very young.
The Bottom Lone on CHPT Stock
Markets are taking a deep breath right now as it relates to the EV industry. There’s still lots of liquidity and interest rates are super low, but investors are pumping the brakes momentarily.
But thinking long term, there’s little to suggest any overall enthusiasm related to the industry. Growth doesn’t look to slow down over the coming decade plus. And that’s why ChargePoint still makes so much sense. It is the first public charging network play. While the company has financial issues to work out, the opportunity still looks too big to ignore.
I still believe that the upside in CHPT stock far outweighs any momentary hesitation related to EVs. ChargePoint makes as much sense as it did prior to the merger. Buy the dip.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
