Don’t Be Fooled by ChargePoint Stock’s Failure to Charge Into October

Electric vehicle charging infrastructure company ChargePoint (NYSE:CHPT) reported much better-than-expected Q2 sales in early September. While CHPT stock initially popped following the announcement, shares now sit about 3% lower than before the report. What gives?

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

Yes, the company reported a larger-than-expected loss for the quarter. But anyone who’s focused on profits at this point is barking up the wrong tree. It’s going to take a while before the company becomes profitable, but that doesn’t mean investors need to wait to take a position. 

Not only did ChargePoint beat analysts’ revenue expectations by a wide margin, but management also raised their guidance for the rest of the year. While CHPT stock looks like it will fail to charge into October, I like its chances in the final three months of 2021. 

A Closer Look at ChargePoint’s Latest Results 

For the second quarter, ChargePoint grew its sales by 61% year over year to $56.1 million. The consensus estimate had been for $49.1 million. Networked charging revenue increased by 91% to $40.9 million during the same period, while subscription revenue increased more than 23% to $12.1 million. What’s more, the company said it had more than 118,000 activated charging ports at the end of July.

Commenting on the results, ChargePoint CEO Pasquale Romano said: “We achieved record revenue, significantly grew our commercial, fleet and residential businesses, launched a charging integration with Mercedes, announced our agreement to acquire e-mobility technology provider has·to·be and acquired eBus and commercial vehicle management provider ViriCiti.”

Management raised their full-year guidance by 15%, forecasting revenue in the range of $225 million to $235 million. This also came in above analyst estimates, which called for annual revenue of $205 million at the time. If the company can hit the midpoint of its projected range, at $230 million, this will represent growth of 57% over the previous year.

That’s a significant jump in an industry that, in reality, hasn’t even gotten started. With the further electrification of transportation, we could see ChargePoint deliver even more impressive growth numbers.

At this stage in the game, sustainable growth is more important from an investment perspective than the company turning a profit. Nothing I’ve seen thus far indicates sales are suddenly going to slow, with one analyst projecting ChargePoint will continue to grow its revenue 60% a year through 2026. 

A Closer Look at CHPT Stock

CHPT stock sits around 45% below its late-June high. However, shares look to have support at $20, which the stock is approaching now. On numerous occasions, shares have bounced higher off this level. And on two of those occasions, CHPT stock rebounded above the $30 level in fairly short order.

In my previous article about ChargePoint, written in August, I called the stock a “screaming speculative buy.” I said, “If you’re a speculative investor, anything less than $25 should be a good entry point for long-term gains. On the other hand, if you can get some under $20, you absolutely should.”

I wrote that a few days before the company announced earnings, which indicated all is well as ChargePoint scales its business to dominate the world of electric vehicle charging. 

Despite the somewhat surprising post-earnings pop then drop, the latest decline in shares has been orderly. After pushing through $26 in early August, CHPT stock has walked back to $20 over the past six and a half weeks. While it appears that $20 is a floor, I suggest anyone thinking about buying CHPT stock for the long haul considers buying a half position today and waits to see if the floor will hold before committing more capital. 

The Bottom Line on CHPT Stock

In early September, InvestorPlace’s Louis Navellier pointed out that the company’s future is tied to the electric vehicle market, which grew by 97% in the first half of the year from 2020 and 153% in Europe, according to a BloombergNEF report. Given ChargePoint’s preeminent position on both continents, I have a hard time comprehending a bearish argument for the company other than that it loses money. 

According to a stat I found online from 2018, only 38% of U.S. publicly traded companies were profitable. The author used Finviz.com to root out the number. Today, using the same screening criteria — net profit margin greater than 0% — I got 2,634 out of 8,294, a rate of 32%, which is 600 basis points lower. 

If I restrict the search to companies with market caps greater than $2 billion, the rate improves to 66%, which means 34% of mid-cap and large-cap stocks lose money — ChargePoint included. How many of those have ChargePoint’s market? Not many, I’d guess.  

Until I’m shown otherwise, I don’t see how ChargePoint isn’t a long-term buy. According to MarketBeat, the average analyst price target for CHPT stock is $33.20, which is more than 60% above the current price.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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. 

 


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