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Chargepoint Looks Poised to Get a Big Charge From the Infrastructure Bill, EV Growth

Chargepoint (NYSE:CHPT) should benefit tremendously from the Biden administration’s infrastructure plan and the upcoming, strong growth of the electric-vehicle market. Meanwhile, the company reported favorable fourth-quarter results last month and is growing rapidly. Given these points, I remain very bullish on the longer-term outlook of CHPT stock.

CHPT a chargepoint charging station
Source: Michael Vi / Shutterstock.com

In general, ChargePoint looks poised to get a huge boost from the EV revolution, making it a good stock to buy for long-term growth investors.

The Infrastructure Plan and Other EV Growth Catalysts

The White House’s infrastructure plan includes “500,000 new EV charging stations—five times the size of the national network now,” The Wall Street Journal reported on Apr. 5.  Although The Journal highlighted logistical problems with building so many EV charging stations, I believe that, given the widespread support in the Democratic Party and the U.S. for EVs, at least a few hundred thousand EV charging stations are likely to be funded by the administration’s infrastructure initiative.

That funding, in turn, will likely amount to huge subsidies for CHPT stock.

Speaking of subsidies, on Apr. 1, Dan Ives, an analyst for Wedbush Securities, indicated that Congress could increase the EV tax credit to $10,000 from the current $7,500, while raising the number of customers of each auto manufacturer who can receive the tax credit.   If Ives’ forecast proves to be correct, EV ownership is likely to soar tremendously in the U.S., hugely boosting demand for EV chargers and Chargepoint’s top and bottom lines in the process.

Also positive for EV demand is the increase in the number of EV models. As Chargepoint CEO Pasquale Romano explained during the company’s Q4 earnings conference call, “The {2021} lineup of EVs includes 20 new models across passenger car and fleet segments. I’ll remind you that our growth scales with EV adoption.”

As many more EV models are launched, many tens of millions of  Americans and Europeans  will find and subsequently buy EVs that appeal to them. Finally, the increase in oil prices this year should help spur meaningfully greater EV adoption.

Favorable Results and Strong Growth

Despite, the novel-coronavirus pandemic last year, Chargepoint’s revenue rose slightly in fiscal 2021, versus FY19, and its gross margin increased by a very impressive ten percentage points for the year, reaching 22.6%. The company’s net loss, excluding certain items, came in at $11.8 million, down from $129.9 million during FY20.

Importantly, in its current fiscal year, Chargepoint expects its top line to soar to $195 million-$205 million, way up from its top line of $146.5 million during the previous fiscal year. That guidance indicates that the company’s growth is greatly accelerating.

Further, Chargepoint had record billings from auto fleets in Q4, and its request for proposals from fleets has soared 61% in Q1 versus Q4. Chargepoint’s North America “market share of network level two charging” has reached 71%,” Romano noted.

Citi Is Upbeat on the Longer-Term Outlook of CHPT Stock

On Mar. 25, Citi started coverage of Chargepoint with a $28 price target and a “neutral” rating. While the firm’s price target is slightly below the current price of the shares, Citi is bullish on Chargepoint’s longer-term potential, saying that “ChargePoint appears well-positioned to enter a period of revenue & margin expansion” in the long-term.

However, it doesn’t expect the company to generate positive EBITDA until 2024.

The Bottom Line

With Chargepoint’s commanding share of the North American EV charger market, Democrats’ strong support for EVs, the Biden administration’s plan to subsidize EV chargers, and the very strong outlook for EVs in the U.S. and Europe, Chargepoint is very well-positioned to succeed tremendously within the next few years. Also likely to help the company, as I’ve pointed out in previous columns, is the rapid advancement of battery technology which should enable EVs to be charged much more quickly.

In light of all these positive catalysts, along with the company’s strong earnings and outlook, I remain convinced that its market capitalization, which currently stands at $8.65 billion, does not come close to reflecting its long-term opportunity.  Finally, I expect Chargepoint to become profitable well before 2024.

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

Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

Article printed from InvestorPlace Media, https://investorplace.com/2021/04/chpt-stock-poised-to-get-a-big-charge-from-the-infrastructure-bill-ev-growth/.

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