The going has been tough for ChargePoint (NYSE:CHPT) stock after its massive price surge earlier in the year.
The electric vehicle (EV) charging infrastructure company has shed nearly 50% of its value since the start of the year.
Now CHPT stock trades at a more reasonable valuation with considerable upside for aspirational shareholders.
It has become apparent that EVs are the way of the future, as sales have gone through the roof in recent years. Several automotive giants have planned a major portion of their fleets to become electric-powered.
However, the industry’s long-term success lies in how robust battery power is to deliver high mileage. Moreover, it also depends upon the quality of the charging infrastructure and its availability across different parts of the country.
ChargePoint is the leader in the deployment of EV charging stations by revenue. It has far more subscribers than its peers, such as Blink (NASDAQ:BLNK) and other smaller private firms across the globe.
Additionally, the company has set some lofty goals for the years ahead, such as a target of roughly $1 billion in sales by fiscal 2025. After a tough year due to the pandemic-induced headwinds, the company is back posting strong top-line results, which are likely to continue in the future.
The pandemic hit CHPT stock incredibly hard, as the company generated just $146.5 million in revenue in fiscal 2021, just 1% higher than the previous year.
However, the trend is reversing fast, as in the second quarter this year, the company generated $56.1 million in revenues, representing a healthy 61% increase from the prior year.
That takes its top-line figure for the first half at an impressive $97 million. Full-year guidance was raised from $225 million to $235 million, representing a 57% revenue growth from the previous year.
Furthermore, the management commented on rising workplace sales compensated by the increased arrival rate in cars.
“Our business volume is now above pre-COVID levels, and our growth rate is above pre-COVID levels, but COVID is not over yet,” said CEO Pasquale Romano.
Diversifying Its Revenues
ChargePoint has been diversifying its revenue mix to include more fleet and residential sales. In its most recent quarter, its residential segment grew by 79% on a year-over-year basis.
Multifamily housing was a major growth area as complexes residents looked to offer charging to their residents.
Recently, the company acquired fleet vehicle management provider ViriCiti. ChargePoint’s fleet segment saw a colossal 187% increase in billings in the second quarter.
Establishing a strong presence in the fleet business could be a game-changer for ChargePoint. The transition from fossil fuels to alternative energy solutions is a greater challenge for fleets than it is for individual passenger cars.
The company can have a massive long-term upside if it can ink some major deals. ViriCiti’s addition will allow ChargePoint’s customers to monitor their operations data effectively and have more visibility into fleet performance.
Several companies, including EV giant Tesla (NASDAQ:TSLA), are competing for supremacy in this field. Therefore, ChargePoint needs to continue to acquire more companies to expand its charging points to fend off its competition.
Bottom Line on CHPT Stock
Despite bearish calls, ChargePoint continues to march forward with a purpose. It has a massive growth runway ahead and expects $2 billion in revenue by 2027. That could take its market capitalization to a dumfounding $60 billion by 2027.
However, the competition is heating up in the sector, and the company needs to increase its merger and acquisitions activity to stay ahead of the curve.
With it trading under $20, the stock is fairly priced and has significant upside potential.
On the date of publication, Muslim Farooque 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.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
