A few months back, ChargePoint (NYSE:CHPT) stock had plenty of positive catalysts that were helping it move higher or, at the very least, hold steady. Not only was the U.S. bipartisan Infrastructure bill helping to sustain buzz about the shares, but the market was highly favorable to speculative growth stocks.
But now the situation has changed. In Washington, the fate of the infrastructure bill, which could help turbo-charge the demand for new EV charging stations, is up in the air . On Wall Street, the looming tapering of the Federal Reserve’s asset purchases , along with Congressional gridlock and high inflation, has made it harder to buy stocks “on the dip”
As markets have become more volatile in recent weeks, growth plays like CHPT stock have been hit the hardest. With interest rates expected to go up, the market is re-assessing the valuations of these former high-flyers.
I’m not shocked that CHPT stock is down 9% in the past month and 33% over the last three months. Expect many investors to remain hesitant to buy it in the short-term. Worse yet, even if the infrastructure bill passes and Wall Street becomes more friendly to growth names, problems with its fundamentals will still call into question the stock’s outlook. Consequently, investors should wait until sentiment is fully negative towards ChargePoint before buying its shares.
CHPT Stock, Political Gridlock, and Market Volatility
ChargePoint’s challenges in the political and financial worlds could persist in the coming months. Political gridlock looks likely to continue delaying the passage of the bipartisan infrastructure bill.
The progressive wing of House Democrats has threatened to sink the bill unless a larger social spending bill is passed first. Moderate Senate Democrats have balked at the latter bill’s high, $3.5 trillion price tag. Democratic leaders are trying to broker a compromise between the sides by cutting the size of the social spending bill, Only time will tell whether they can get both bills passed.
Back on Wall Street, it’s questionable whether the market’s current downward trend will continue. The market will likely continue to be volatile, due to worries about monetary policy and other concerns like slowing economic growth. Expect the events in Washington and on Wall Street to push CHPT stock lower.
Even ChargePoint’s Fundamentals Are Up for Debate
So it’s clear that, based on what’s going on politically and in the market, it’s best to hold off on taking a bullish position in CHPT stock. But what if the political and trading situations change?
In other words, what will happen to ChargePoint if the infrastructure bill is signed into law, the market avoids a meltdown, and changes in monetary policy have a less dramatic impact on stocks than previously expected?
Everything depends on the price of the shares when the political and market trends are their friend again. That’s because the company has other, important problems.
If ChargePoint continues generating most of its sales from its lower-margin hardware station installation business, it’s going to be tough for the firm to justify its current, elevated valuation.
On top of that, there are other longstanding concerns about the company, including tough competition and the uncertainty of whether home based chargers will limit the demand for public charging stations.
Don’t Buy CHPT Stock Now
The current trends in the political and market realms could continue, putting more pressure on ChargePoint’s shares. Even if these issues are resolved in a favorable manner for ChargePoint, you may still want to avoid its shares.
The stock currently trades for 25 times analysts’ average sales estimate during this fiscal year. ChargePoint’s stock has a long way to fall before it hits a reasonable valuation, given its many risks.
If EV charging stations become as ubiquitous as gas stations. CHPT stock could still prove to be a winner over the long-run, But for long-term investors, waiting until the shares become truly oversold is the best move.
On the date of publication, Thomas Niel 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.
Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
