- The market for ChargePoint (CHPT) electric car chargers has yet to develop.
- You can see when it might happen by conducting a simple census.
- Until a non-Tesla electric market develops, this is dead money.
About a month ago I wrote about ChargePoint (NYSE:CHPT) stock, I said the electric vehicle charging company was waiting for its market to happen.
It’s still waiting. Shares are down almost 30% since then, as the stock market rout that began with tech has become more general.
The problem I have with ChargePoint is the same one I have with myself. It’s early to the party. In my case, it means I write about trends and invest in companies before they’re ready for the mass market. In the case of ChargePoint, they have prepared for a huge electric vehicle market that doesn’t yet exist.
The Problem for CHPT Stock
ChargePoint is due to release earnings on May 31, for the quarter ending in April. A loss of 22 cents/share is expected on revenue of $80 million. For the same quarter last year ChargePoint had revenue of $40 million. It had revenue of $240 million for fiscal 2022, which ended in January.
In the hot market of 2021 such growth was impressive. ChargePoint stock sold for over $35/share last July. Today no one wants it. ChargePoint is selling for about $10.60/share and has a market cap of $3.6 billion. To me, that says you can still lose money on this stock. It’s still selling for about 10 times revenue and is still losing money.
When earnings come out, look at cash flow. ChargePoint lost $174 million in cash for the year ending in January. This left it with $315 million, after coming public in early 2021 through a special purpose acquisition company (SPAC) called Switchback Energy.
If ChargePoint has learned to husband cash, and the expected revenue number says it has, think about investing based on the chances the plane will crash. Then buy some more Amazon.Com (NASDAQ:AMZN).
When to Buy
“I want my next car to be electric.” I wrote this while ChargePoint was coming public.
It didn’t happen. My beloved Scion was crushed at 10 miles per hour, and I had to buy something this year. I chose a Toyota (NYSE:TM) hybrid. While in the market I walked down my street looking for hybrids and electrics. I found two Teslas (NASDAQ:TSLA), a Nissan (OTCMKTS:NSANY) Leaf, and four Toyota Priuses out of 60 cars.
Since Tesla has its own charging network, I discount those. The fastest ChargePoint charging units, called DC Fast, charge at 480 volts, but the company also has a lot of 240 volt chargers on city streets. These take all night to charge up an electric vehicle and are usually placed as amenities for people to sip charge while they eat or shop.
What ChargePoint needs to succeed is a large market of non-Tesla electrics willing to pay for DC Fast service against competitors like Volkswagen’s (OTCMKTS:VWAGY) Electrify America, EV Go (NASDAQ:EVGO), Blink Charging (NASDAQ:BLNK) and the rest.
The Bottom Line on CHPT Stock
ChargePoint is selling charging equipment, not services. This means it can probably survive until the market develops if management is frugal.
As an crunchy granola environmentalist, I would love to suggest that you chase ChargePoint, that you play the EV revolution, and that you accept the latest buy recommendations from brokerages.
But I don’t want you to lose money, as I have, chasing markets that don’t yet exist.
The best strategy right now is to look for tech stocks that offer real products for real markets, with real earnings that save businesses real money. These companies will fight inflation and, while they may not be sexy, they will deliver a return while we wait for electric vehicle production to ramp up.
When will ChargePoint be ready to run? When you read that Buc-ees is putting in electric charging stations.
On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at email@example.com, tweet him at @danablankenhorn, or subscribe to his Substack.