The performance of ChargePoint (NYSE:CHPT) stock has disappointed investors over the year, but there’s reason to believe good times are ahead for the stock. Shares of the electric vehicle (EV) charging company have decreased 3% year-to-date to $18.40 per share as of March 24.
Over the past year, CHPT stock dipped 19%, significantly underperforming the EV market. The Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV), a proxy of the EV market, is up by nearly 5% in the last year. It is lagging considerably behind the equity market, as the SPDR S&P 500 Trust ETF (NYSEARCA:SPY) advanced 15% in the past year to $445.94 per share.
Despite this subdued performance, the EV charging industry is set to thrive in the next years, following the $5 billion bipartisan infrastructure bill for deploying EV charging stations nationwide. Yet the announcement has not generated the desired effects on EV charging stocks, as more time is needed to deploy these investments.
In this context, let’s dive into the market positioning, financials, and valuation metrics of CHPT stock to see if it is nearing a bottom.
CHPT Stock Is Focused on Growth at All Costs
The worldwide EV charging market “is expected to grow at a CAGR of around 27.5% from 2020 to 2027 and reach the market value of over US$ 61.2 Bn by 2027,” providing a constructive backdrop for EV charging stocks.
Over the fourth quarter 2022 earnings presentation, ChargePoint acknowledged that the acceleration of EV adoption had a positive effect on charging demand, enabling the company to deliver record revenues over the quarter.
Nevertheless, the EV charging specialist is focusing on increasing market share both in the U.S. and Europe. Instead of preserving short-term profits, the company chose to prioritize customer acquisition, which hurt gross margins by 3% over the year.
Despite these headwinds, CHPT stock provides compelling opportunities over the long term. The company has been recognized for its leadership in global electrification and has been ranked as one of Fast Company’s most innovative companies in 2022.
As EV charging moves into the mainstream, ChargePoint has forged new partnerships with major automakers to integrate its charging solutions on the carmakers’ infotainment systems. These integrations will have long-term positive synergies that will lift recurring software subscription revenues and boost CHPT’s gross margins.
No Profit, But a Healthy Balance Sheet
ChargePoint’s top line is esteemed to deliver a strong growth pattern over the next year, but the EV charging specialist is still struggling to deliver a profit.
After growing by a hefty rate of 65% year-on-year to $242 million in ChargePoint’s fiscal year that ended in January, the company has issued guidance with a midpoint of $475 million for this year.
Despite this healthy growth, the consensus of analysts does not expect CHPT to deliver a profit in the next two years. Net loss amounted to $299 million in fiscal-year 2022 and the company is expected to continue to show losses next year.
The balance sheet remains healthy for the moment with a cash and equivalents position of $315 million. However, with a profitless business, the inflow of cash will mainly come from the issuance of new equity, which does not bode well for ChargePoint’s stock performance due to the dilution of its shareholders.
CHPT Stock Has an Elevated Market Valuation
While ChargePoint’s stock sells at a premium compared to peers, the EV charging specialist is well-positioned to benefit from the rapid growth of the EV markets.
Nevertheless, investors need patience for CHPT to deliver on its prospects. I am bullish on the CHPT and believe that current prices represent an opportunity to build a long-term position on this EV charging leader.
On the date of publication, Cristian Docan 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.
