EVgo Stock Looks Even More Attractive Following Sell-off

Electric vehicle stocks have struggled in 2021, yet I remain upbeat on EVgo (NASDAQ:EVGO), which owns and operates a fast-charging network for EV batteries in the United States. A number of major partnerships and recent third-quarter results show the EV charging business is advancing rapidly on multiple fronts despite the sharp drop in EVGO stock over the past seven weeks.

EVgo fast charging station
Source: Sundry Photography / Shutterstock.com

In my previous column on EVgo, on Nov. 30, I said shares looked “vastly undervalued.” At that time, EVGO stock was trading just below $13 after falling 34% from its mid-November high. Since then, shares have continued to struggle, briefly dipping below $9 this week before rebounding. Still, EVGO stock sits about 20% below where it was when my previous article was published. As a result, its valuation has become even more enticing.

EVgo Delivers Encouraging Q3 Results

When EVgo reported third-quarter earnings on Nov. 10, the company surprised analysts with a profit of 9 cents a share. Wall Street had been expecting the company to post a loss of 8 cents per share. Revenue also came in ahead of expectations, rising 73% year over year to $6.2 million. And management upped its full-year sales outlook to a range of $20 million to $22 million from $20 million previously.

EVgo ended Q3 with more than 310,000 customer accounts, marking a nearly 13% increase over the end of the second quarter. Network throughput was up 31% over the same period, hitting a record high of 8 Gigawatt-hours (GWh).

Meanwhile, on the earnings call accompanying the results, management outlined their expansion plans, which will be achieved in part through its partnership with General Motors (NYSE:GM).

Currently, EVgo has around 800 fast-charging stations in 68 metropolitan areas across 35 states. At the end of July, the two companies announced they would be working together to expand the EVgo network to 2,750 charging stalls by 2025. During the earnings call, though, EVgo CEO Cathy Zoi said they had upped that target by 500 to 3,250 charging stalls, with plans to expand the network to 75 metropolitan areas in at least 40 states.

GM Partnership Becoming Even More Attractive

A number of recent developments bode well for the EVgo/GM partnership and, in turn, for holders of EVGO stock.

GM began delivering its electric Hummer pickup truck in mid-December. The Hummer EV Edition 1 made headlines a few months prior for selling out in 10 minutes, indicating strong demand for electric pickups.

According to the company, the Hummer EV Edition 1 can go from 0 to 60 in three seconds, has up to 1,000 horsepower and an estimated range of 329 on a single charge. That range is commendable when compared with some of the other popular EVs on the market today. However, as more consumers turn to EVs, they will demand a robust network of fast-charging stations, which should incentivize GM to continue to support the buildout with EVgo.

Speaking of more people driving EVs, GM said it will release 30 EV models by 2025, including cars, pickups and SUVs, as it vies to become the third biggest EV maker in the world. What’s more, GM recently announced it would make components that will allow gasoline-powered vehicles to be converted to EVs, along with equipment for various types of electric-powered machines.

Other Major Partners

GM is EVgo’s most-promising corporate partner, but it is not the only one. Uber Technologies (NYSE:UBER) recently expanded its alliance with the EV charger operator.

As InvestorPlace columnist David Moadel recently wrote: “EVgo disclosed an expansion to its EV charging program for ride-share drivers on Uber’s platform. Drivers using Uber will continue to be able to access EVgo’s member rates without any monthly fees. Furthermore, drivers with Uber Pro Gold, Platinum or Diamond status will unlock even lower EVgo Plus rates.”

EVgo also has multi-year partnerships with retailers Target (NYSE:TGT), Kroger (NYSE:KR), Whole Foods and Albertsons (NYSE:ACI), as well as a number of real estate companies.

And earlier this month, the California Air Resources Board awarded EVgo a $1.7 million grant to install fast chargers across the state. This news should be encouraging for anyone who owns EVGO stock not so much because of the amount of money awarded, but because it indicates that California, a global leader in EV deployment, wants to work with EVgo.

Meanwhile, the infrastructure bill passed by Congress and signed into law by President Joe Biden includes $7.5 billion for EV chargers. Zoi said she expects the funds to start being disbursed at the end of 2022. Those funds are likely to boost EVgo’s financial results and EV stocks.

The Bottom Line on EVGO Stock

In my previous column on EVGO stock, I noted EVgo had “a market capitalization of around $932 million, versus $8.5 billion for ChargePoint (NYSE:CHPT) and $1.6 billion for Blink Charging (NASDAQ:BLNK).”

Today, the market cap of EVGO stock has shrunk to $714.5 million. Its competitors’ market caps have declined similarly to $6.5 billion and $1.2 billion, respectively, but they still remain well above that of EVGO stock.

In light of EVgo’s optimistic outlook, growth plans and its shares’ relatively low valuation,  I continue to recommend buying EVGO stock.

On the date of publication, Larry Ramer held a long position in EVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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. 

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