ChargePoint Holdings (NYSE:CHPT) has been called both the future of electric vehicle infrastructure and a fallen star. The company boasts the largest network of EV charging stations in North America and Europe, with more than 118,000 activated ports at the end of July. But Wall Street’s inability to decide on a single narrative has contributed to volatility in CHPT stock and left investors questioning where shares are headed.
CHPT stock has fallen more than 50% from its late-June high and is down about 20% in the past month to trade around $18 a share.
However, the stock could be due for a reversal higher sooner rather than later if the company’s recent earnings results are any indication. After all, ChargePoint is a growth company, and growth companies rely on improving sales as a primary indicator of success.
Analysts’ 12-month price targets for CHPT stock range from $24 to $46, with an average target of $34.45. If shares can reach the low end of the range, investors who get in now will see a profit of more than 30%. And a move to the consensus target would yield a return of more than 90%.
ChargePoint Reports Strong Revenue Growth
There was plenty in ChargePoint’s fiscal second-quarter earnings report, released in early September, to make me believe CHPT stock should rise.
The company recorded $56.1 million in revenue for the quarter, a 61% year-over-year increase. This was well ahead of analysts’ consensus estimate of $49.1 million. Even more impressive, networked charging revenue jumped 91% during the same period to $40.9 million.
Again, as a growth company, this bodes well for ChargePoint. And so does management raising its full-year guidance by 15% following the results. They now expect fiscal 2022 revenue of between $225 million and 235 million, which was $20 million to $30 million above what analysts were predicting at the time.
Analysts have since raised their forecasts to bring them in line with management’s estimate. The consensus revenue target sits at $230.4 billion, which is 57% above the fiscal 2021 sales figure.
From a revenue perspective, ChargePoint is clearly crushing it. However, there were some other less-than-rosy numbers in its quarterly results worth mentioning.
Now, it’s not uncommon for a growth company like ChargePoint to post losses, especially this early on. However, things are not trending in the right direction. The company’s adjusted quarterly net loss was $40.4 million, up from $22.6 million in the same quarter a year ago. ChargePoint also saw its adjusted gross margin decline, falling to 23.1% compared with 25.7% a year ago.
The failure to expand margins and shrink its losses could be part of what’s weighing on CHPT stock. Since the company announced earnings on Sept. 1, shares are down more than 15%.
The Future of EV is Bright
Another thing likely holding shares back over the past month is the lack of movement on a U.S. infrastructure bill.
In August, the Senate passed a $1.2 trillion infrastructure package that included $7.5 billion earmarked for the installation of electric vehicle charging stations across the country. However, the proposal has been delayed in the House of Representatives and negotiations are ongoing.
This week, Senate Majority Leader Chuck Schumer said the Democrats will try to get a bipartisan infrastructure bill passed by the end of October, but whether that will happen is anyone’s guess. Clearly, billions of federal dollars spent on EV charging infrastructure would be a boon for ChargePoint.
As legislators continue to hash out an infrastructure plan, recent moves by major automakers bode well for the EV market.
In late September, Ford (NYSE:F) announced it will build two lithium-ion battery plants in Kentucky, along with a 3,600-acre campus in Tennessee that will include a battery plant and a new assembly plant for electric trucks. The joint venture with South Korea’s SK Innovation is expected to cost more than $11.4 billion and create 11,000 jobs. This is in addition to the $30 billion Ford previously pledged to put toward electric vehicles through 2025.
Ford isn’t the only U.S. automaker rushing to expand its capacity in the EV market, though. Back in June, General Motors (NYSE:GM) said it planned to increase its investment in electric and autonomous vehicles by 75% to $35 billion by 2025.
The Bottom Line on CHPT Stock
Only time will tell how the expanding electric vehicle landscape will translate into growth — and hopefully profits — for ChargePoint. But the future looks bright indeed. Analysts predict ChargePoint will grow revenue by 57% this year and 59% next year, which should help investors overlook the company’s losses.
EV stocks have fallen out of favor in recent months, and CHPT stock is likely to remain volatile. However, shares are attractive as a long-term bet. And any positive news, such as the passage of an infrastructure bill or further EV capital commitments from corporate America, could result in shares running up to analysts’ price targets much sooner than anticipated.
On the date of publication, Alex Sirois 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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
