- As the drivers of its February/March rally fade, ChargePoint (CHPT) stock is pulling back.
- With this, shares could move toward lows set earlier this year.
- Even if you believe its growth potential outweighs a rich valuation, you may be better off taking your time before buying.
Like with many growth stocks lately, buying when others were selling was a smart move when it came to shares in ChargePoint (NYSE:CHPT). Thanks to renewed interest in electric vehicle (EV) related stocks and the growth stock rally in March, CHPT stock is up big from its 52-week low ($11.21 per share) hit in January.
But in recent days, as the drivers of its recent rally have faded, shares have pulled back. With this, is now the time to jump into it? Not so fast. As the main drivers of its upward surge fade, chances are it’ll continue to move back toward its recent lows.
That’s not to say it’ll make a complete trip back to around $11 per share. Yet even if you’re looking to lock down a position, you may want to take your time before doing so. A more opportune entry point may soon emerge.
| CHPT | ChargePoint Holdings, Inc. | $17.06 |
The Latest With CHPT Stock
Two factors played a role in ChargePoint’s dramatic surge in price. First, following the Western economic sanctions against Russia for its invasion of Ukraine, the resultant spike in oil prices led many to believe that there would be an accelerated move to EVs. This factor helped it zoom toward $20 per share by early March.
Then, there was the March relief rally, which extended the CHPT stock rebound. Following the Federal Reserve’s official raising of interest rates last month, investors dived back into stocks. In particular, growth plays. This was due to the perception that with the market’s drop since March, the Fed’s rate hike and other fiscal tightening plans were already priced-in.
Yet now, both factors have faded. Fundamentals, not hype, are again in the driver’s seat when it comes to EV stock prices. With the Fed’s more recent statements on its tightening plans, growth stocks have pulled back. Future drops may be in store, as the central bank keeps on taking a more hawkish stance in order to rein in inflation.
As both drivers fade, and uncertainty creeps back up after zooming on full charge, it could continue to move into reverse in the near-term.
There’s Merit in the Long-Term Bull Case (if the Price Is Right)
If you were hoping to ride a continued recovery for CHPT stock in the short-term, don’t hold your breath. With the relief rally over, and investors less charged-up about EV plays again, shares may just tread water in the short-term. At worst, they’ll continue to slide, giving back recent gains.
This makes it less of an opportunity for investors with a short time horizon. But what if you have a long time horizon? I believe that today’s valuation continues to overestimate its long-term growth potential. As a Barron’s commentator pointed out last month, revenue estimates are already falling short of past projections.
Granted, you may not have this take. You may believe its long-term growth potential isn’t fully reflected in today’s stock price. Already the operator of the world’s largest EV charging network, add in its partnerships with leading automakers like Toyota (NYSE:TM) and Volvo (OTCMKTS:VLVLY), and the company appears well-positioned to dominate when EVs gain critical mass.
Still, while it may prove skeptics like myself wrong over a longer timeframe, that doesn’t mean it’s best to jump into it right away. Getting in at an inopportune time can have a big negative impact on your long-term returns.
If Bullish, Take Your Time Before Buying
Although its revenue is expected to rise substantially from last year, ChargePoint remains many years away from (potentially) experiencing its true “payoff” moment. In other words, there’s little risk in waiting for a more opportune price.
The two factors that gave shares a boost through the start of this month have dissipated. There’s a high chance shares give back a fair amount of their recent gains. Currently at around $17 per share, a return to lower prices may be what arrives first. Well, before there’s justification to send it back up to $25, $30 or more per share.
Even if you are bullish, take your time before buying CHPT stock.
On the date of publication, Thomas Niel 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.
