EVgo (NASDAQ:EVGO) stock has shown massive volatility over the past 14 months.
It’s very difficult to pin down where it is going. It’s easy to assume volatility will continue, but that doesn’t do potential investors much good.
They want ideas they can agree or disagree with. They can make decisions based on that.
My feeling is that EVgo should rise moving forward. It is essentially very close to an all-time low price, but fundamentally reasonable.
It should grow, and thus its price should rise. Let’s look at the factors indicating that should be the case.
Revenue Growth Ahead
Stocks like EVgo move based primarily on underlying revenue growth: If sales rise, it’s generally true that prices rise.
Operational efficiency and profitability are issues to be tackled later on. It’s a tried and true test within this stock sector.
By that measure, EVgo simply looks attractive. The firm is expected to record approximately $21.06 million in revenues in 2021 when all is said and done. That figure is expected to balloon to $54.37 million in 2022. So, if revenue growth piques the market’s interest, EVGO ought to bounce back.
Frankly, this makes sense. EVGO stock trades around $8 as I write this. So, logically it should move significantly higher if revenue more than doubles in the coming year.
In fact, if P/S ratios simply remain where they are, EVgo will more than double.
Remember, it has traded at $20 before while its sales levels were lower. Based on these simple ideas alone, there’s a lot of reason to believe in a bullish narrative for the company.
In fact, the average target price for EVGO stock sits above $18. That looks easily achievable based on what I’ve just noted regarding this year’s revenues and P/S ratios.
Broader Catalysts in Place
EV charging stocks surged in November. Back then it looked like EV charging stocks were about to have their season.
It looked like the structural factors had all fallen into place for the sector to establish a news floor price.
EV sales were and remain strong. EV adoption appears to be the way forward with legacy manufacturers upping their investment in electrification.
Biden’s infrastructure bill reinforces the notion: It earmarks $7.5 billion for building the electric vehicle charging network over the next five years.
As a result, EV charging stocks soared. But the rally didn’t last. The rapid rise spooked investors as many characterized it as overzealousness on the part of the market.
EVGO stock dropped from $19 on Nov. 11 back to $10 as rapidly as it increased to that high. That causes serious uneasiness on the part of investors.
There’s no way to predict where the tide will swell or ebb in this sector. But EVgo prices are low now and it doesn’t seem that they should decline further.
Wall Street Cautiously Optimistic
Analysts with both Needham and JPMorgan (NYSE:JPM) anticipate EVgo to be a long-term winner.
Needham analysts like the company’s high-traffic metropolitan area strategy and partnerships. They state that: “These factors, combined with the company’s disciplined expansion strategy, provide EVgo with industry-leading asset utilization and strong operating leverage.”
However, they didn’t issue a target price for EVgo citing overly aggressive Wall Street expectations. Meanwhile, JPMorgan gave EVGO a $20 target price earlier in December for many of the same reasons I discussed earlier.
What to Do
I firmly believe EVgo is going to move higher again soon. Current prices combined with expected revenue growth make it a near certainty.
EV charging stocks have proven volatile. They will remain that way. But prices now are too good to pass up as it relates to EVgo.
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.