- ChargePoint (CHPT) is building for an electric vehicle market that doesn’t exist yet.
- The U.S. car market is still missing mid-market cars affordable to the urban middle class.
- It’d be best for investors to wait on CHPT stock.
ChargePoint (NASDAQ:CHPT) stock represents an electric car charging network that came public through a special purpose acquisition company (SPAC) in 2020.
The shares quickly rose to over $46 each in late 2020. However, they opened April 12, 2022 at $16.50.
ChargePoint developed much of its business in the last decade, with 240 volt equipment. That’s fine for your clothes dryer, but it takes all night to recharge an electric car battery with that voltage. The market is moving toward 480 volt equipment, which ChargePoint calls “DC Fast.”
Even the DC Fast business isn’t moving fast. That’s because Tesla (NASDAQ:TSLA) still has most of the business and it has its own charging network. ChargePoint is a bet on a market that doesn’t exist yet.
The Missing Middle
As I wrote about General Motors (NYSE:GM) before its agreement with Honda (OTCMKTS:HNDAF), America’s car EV market today is devoted to luxury. This is not true of more-advanced electric car markets like China, where there are electrics selling for under $20,000.
There’s a lot more money in Chevys than Cadillacs. GM knows this. Its deal with Honda will make its Ultium platform the basis for mid-market electrics from both companies. Unfortunately, the first such cars won’t come out until 2027.
Until then, we middle-class car buyers are stuck with hybrids like the Toyota (NYSE:TM) Prius or underpowered cars like the Nissan (OTCMKTS:NSANY) Leaf. Volkswagen (OTCMKTS:VWAGY) has an interesting line-up that sells well in Europe, along with a charging network called Electrify America. But its main U.S. electric for 2022 remains the I.D. Buzz, a version of its old microbus.
What this means for ChargePoint is that the market it’s devoted to serving doesn’t exist yet. The company had just $80 million in revenue for the three months ending in January, $242 million for the full fiscal year. It headlined the hope of doing $450 -500 million in business this year. But that would still leave an expensive stock, a market capitalization of $5.6 billion at the start of trading on April 12.
How Long to Wait on CHPT Stock
It was clear in January ChargePoint would need more cash. It had just $315 million at the end of that month.
It recently got $300 million from Antara Capital, in the form of convertible five-year notes with a 3.5% interest rate, or stock valued at a 30% premium to its market price. At its current rate of losses, this is enough to keep things going until mid-2024.
By that time, ChargePoint hopes, the market will look very different. There may be millions of homeowners eager to buy its 240 volt gear. There may even be some gas stations willing to install its DC Fast equipment. The problem there is time. It takes a half-hour to charge a car at 480 volts and customers need something to do. You’ll know the market has turned around when Buc-ee’s puts in electric charging.
The Bottom Line on CHPT Stock
CHPT stock is simply not what the current market is looking for.
Fast growth without profit is unfashionable.
ChargePoint does have a new agreement with Goldman Sachs (NYSE:GS) that will let it finance charging stations. When the market is ready for ChargePoint, the money is clearly there.
Analysts at Tipranks still like the name, with 8 of 11 telling customers to buy. Investors at Robinhood (NASDAQ:HOOD) also like the name.
Personally, I think you can wait for it. Until the market sees automakers rushing into the missing middle of the market, I doubt ChargePoint stock is going anywhere. If you do buy, know that you’re early, and that you’ll have to wait five years before you know what you have. This is a stock for young speculators who know they’ll get older.
On the date of publication, Dana Blankenhorn held no positions in companies mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.