High Analyst Revenue Forecasts Will Drive Up ChargePoint Stock

ChargePoint (NYSE:CHPT) reported excellent fiscal third-quarter earnings on Dec. 7, 2021. The report was for the quarter ending Oct. 31 and came with higher revenue guidance. All told, this electric charging station company’s revenue is now expected to climb significantly this year and next. As a result, expect to see CHPT stock push higher despite its recent weakness.

CHPT a chargepoint charging station
Source: Michael Vi / Shutterstock.com

No doubt, CHPT stock has had a rough time lately. The stock slid down from a peak of $27.69 on Nov. 17 to a low close of $12.94 on Jan. 24. That represents a decline of over 53% in the past two months.

As a result, CHPT stock now looks like a pretty good bargain. Investors may now want to consider averaging into the shares.

Here’s what you should know about ChargePoint stock.

CHPT Stock: Where Things Stand

When it comes down to it, the recent weakness in CHPT stock does not seem to match the very positive outlook for ChargePoint’s future revenues. After all, more and more people are buying electric vehicles (EVs) and those EVs are going to need to be recharged.

As a result, ChargePoint’s ever-increasing footprint throughout the U.S. and other countries will have no problem being used. That implies that the company’s sales will steadily grow over the next five years or longer.

For example, Seeking Alpha recently reported that ChargePoint raised its own revenue guidance for the year ending Jan. 31, 2022. Management expects Q4 revenue between $73 million and $78 million versus $63 million consensus. Further, it expects full-year revenue of $235 million to $240 million. Seeking Alpha’s survey of 17 analysts has an average of $378.6 million for 2023 revenue. That represents a potential rise of more than 59% from the average estimate for this year.

In other words, there is simply nothing wrong with this company’s sales outlook. Granted, ChargePoint is not yet profitable on a net income basis. Its GAAP net loss was $69.4 million for the most recent quarter. However, as sales steadily rise, investors can expect profits to roll in.

Where This Leaves ChargePoint

As of Jan. 24, ChargePoint had a market capitalization of $4.38 billion. This implies that CHPT stock has a price-sales (P/S) multiple of around 18 times for the year ending Jan. 31, 2022.

However, given the sales growth forecast for 2022, the P/S ratio falls dramatically to just 11.6 times. This is seen by dividing the $4.38 billion market cap by the 2023 revenue forecast of $378.6 million.

Moreover, you can see that, within two years for example, the P/S multiple could fall quite dramatically. Here is how that works out.

First, Seeking Alpha’s survey of Q4 2023 revenue shows an average analyst estimate of $197 million for the quarter. Therefore, on a run-rate basis, this implies that 2024 revenue could hit $788 million even without any growth.

Next, we have to reduce this revenue by bringing it back to present value. Using a 15% discount rate and a two-year time frame, the discount factor is 75.6%. Multiplying $788 million by 75.6% brings that revenue to a present value of $595.8 million.

If we divide ChargePoint’s recent market cap of $4.38 billion by the $595.8 million present value for 2024 revenue, we get a P/S multiple of just 7.35 times.

What to Do with CHPT Stock

That is why CHPT stock is likely not that expensive at today’s price. For example, at 10 times sales, its market cap should be $5.958 billion. This represents a potential upside of 36% over the recent market cap of $4.38 billion. It also means that ChargePoint should be trading at $17.60. This is 36% over the recent price of $12.94.

As a result, investors in CHPT stock today are getting a pretty good bargain. Given the company’s steady growth prospects, it looks like it’s worth at least 36% more at $17.60 per share.

On the date of publication, Mark R. Hake did not hold (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.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.

Article printed from InvestorPlace Media, https://investorplace.com/2022/01/high-analyst-revenue-forecasts-will-drive-up-chpt-stock/.

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