ChargePoint Holdings (NYSE:CHPT) reported its fourth-quarter results on March 11. It was the electric vehicle (EV) charging network’s first as a public company. CHPT stock gained more than 6% on the news. 

With a ton of growth ahead of it and losses to bear, investors are wondering what it’s got up its sleeve to keep its share price higher. 

In mid-February, I said that Switchback Energy, the special purpose acquisition company that would merge with ChargePoint days later on Feb. 26, was a better buy in the low $30. 

Well, as I write this, it looks as though ChargePoint stock is likely to open trading several dollars below that number. 

That makes it a buy. Right? 

Let’s consider what we know post-earnings. Hopefully, I’ll be able to put a nice “buy” wrapper on its stock. 

The Highlights of ChargePoint’s Year

Before touching on the income statement, I would be remiss if I didn’t mention CEO Pasquale Romano’s opening comments from its earnings call. ChargePoint’s leader pointed out that it has $650 million in cash on its balance sheet, more than the company’s spent in its entire 13-year history. 

In 10 years, let’s hope this doesn’t come back to haunt ChargePoint. With newfound spending money, it won’t be nearly as restrained with the outflow of cash. I hope they allocate it wisely. All the good ones do. 

Anyway, revenue in 2021 was $146.5 million, $2 million higher than a year earlier. Given Covid-19 was a crimp in its business, I’m sure the company is more than happy with the outcome for the year.   

As the CEO stated in its conference call, its higher-margin workplace products suffered during Covid-19 due to people working from home. It believes that its commercial business, which accounts for 70% of its revenue, will recover post-Covid. I guess we’ll find out.   

From a profitability standpoint, ChargePoint lost $197.0 million in 2021, 52% higher than a year earlier. However, on a non-GAAP basis, it lost $117.8 million, 9.3% less than in 2020. 

Further, its gross margin for the entire year was 22.5%, 10 percentage points higher than a year earlier. In 2022, once the company’s revenue returns to a pre-Covid mix, its gross margins will continue to climb. Wolfe Research analyst Shreyas Patel, in a question to Romano, pegged it at 31% in the year ahead.

However, CFO Rex Jackson was quick to say it wouldn’t guide on margins. 

Sadly, there were only four analysts on the call, a sign that ChargePoint and the rest of the charging networks still have some work to do to get the street behind its stock and company. 

How Low Can CHPT Stock Go?

Look, the analysts that do cover ChargePoint all rate it a buy with an average target price of $42.67. This could be a case very similar to Tesla (NASDAQ:TSLA), where the analysts are dragged into covering the stock, kicking and screaming all the way. 

And that’s okay. It’s a lot easier to make mucho dollars on an investment when the street ignores your baby and finally sees the light. In that case, as Warren Buffett would say, let it fall some more.

In 2022, the company expects revenues to grow to between $200 million at the midpoint of its guidance, with $37.5 million (midpoint) to come in the first quarter. That’s 37% revenue growth in 2022. 

I don’t know about you, but a 37% growth projection seems just about right. Not outrageously high or too conservative to think management’s been smoking something. 

ChargePoint has a current market capitalization of $8.45 billion based on 277.8 million shares outstanding. That translates to 30 times sales. Based on 2,139 companies with a market cap of $2 billion or more, CHPT is cheaper than 134 of those companies on a P/S basis. 

According to Yardeni.com, the current forward P/S of the S&P 500 is 2.6x. Now, no one would confuse ChargePoint as an S&P 500 company at this point, but someday, maybe. The highest P/S is real estate at 6.8x, with technology a close second at 5.9x.  

So, it’s certainly not cheap relative to other companies with a decent market cap.

The Bottom Line

In my February article, I said the better near-term buy might be Newborn Acquisition (NASDAQ:NBAC) rather than ChargePoint. Since then, the two stocks have basically mirrored their performances. The SPAC’s merger vote has yet to occur as I write this, although a March 17 date is on the calendar. 

At the time, I also said that I liked ChargePoint’s future.

I think the company’s Q4 2021 results should allay fears that it is all show and no go. It’s got real potential. But I just had a gut feeling it was going to shed a few dollars in March or April. 

And that’s precisely what happened. You could’ve bought CHPT stock below $20 on March 5. 

If you’re in for the long haul, a buy in the mid-$20s ought to set you up for some nice gains over the next 12-24 months. Patience, however, is key. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.