EV charging stocks have not participated in the year-to-date broad market rally. The reason is intensifying competition and sustained cash burn. I, however, believe that several EV charging stocks are deeply oversold and poised for a big reversal rally.
In addition to the valuation factor, business developments for several EV charging companies have been encouraging. This column focuses on the under-the-radar EV charging stocks to buy for 100% gains in the next 12 to 18 months.
In terms of market potential, a study indicates that the U.S. would need 28 million EV charging ports by 2030. Rules in the European Union require EV fast charging stations every 60km. The growth potential is significant even in emerging economies.
The key point I want to make is that there is a big market for multiple players to survive and grow. Notably, the industry is still at a nascent stage. It, therefore, makes sense to continue investment in EV charging stocks.
Let’s discuss three stocks that look attractive for quick gains.
Wallbox (NYSE:WBX) stock has witnessed a deep correction of 67% in the last 12 months. The under-the-radar EV charging stock looks deeply undervalued at current levels of $2.7.
From a business perspective, there are multiple reasons to like Wallbox. The first point to note is that the company is pursuing aggressive geographic diversification. Europe is the key market for Wallbox, but growth in North America has been robust. At the same time, the company has a presence in Latin America and Asia Pacific. With a big addressable market, there is visibility for stellar growth.
It’s also worth noting that the company is going aggressive on DC charging sales. For Q2 2023, the company delivered 350 units of Supernova DC fast chargers. This was higher by 700% on a year-on-year basis. Additionally, software and services revenue has been increasing. With operating leverage and cost-cutting initiatives, I expect significant EBITDA margin improvement. Given these positives, WBX stock is attractive and poised for a strong reversal rally.
EVgo (NASDAQ:EVGO) is another name among EV charging stocks that’s worth considering. After a deep correction, the stock is in oversold territory. Given the point that the short interest is still around 20%, I expect a big short squeeze rally for EVGO stock.
In terms of business developments, there is good and bad news. However, I believe that the negatives have been discounted in the price. For Q2 2023, EVgo reported stellar revenue growth of 457% on a year-on-year basis to $50.6 million. With a robust construction backlog of charging stalls, revenue growth will likely remain robust.
Conversely, EVgo expects an adjusted EBITDA loss of $74 million for the year. Considering the aggressive expansion plans, I expect further equity dilution. However, operating leverage and growth in software and services revenue will likely translate into a narrowing of EBITDA losses in 2024 and beyond. Therefore, I believe that better days are ahead regarding stock price action.
Allego (NYSE:ALLG) is another deeply oversold EV charging stock that seems poised for a big reversal rally. Towards the end of August, ALLG stock had touched lows of $1.55. The stock is already higher by 24%.
The company’s results for the first half of 2023 show two positives to note. First, Allego reported healthy revenue growth of 34.6% on a year-on-year basis to 68.2 million euros. Further, the company reported a positive operational EBITDA of 11.7 million euros.
From a growth perspective, Allego reported 1,661 charging ports as of Q2 2023. Additionally, the company has a secured backlog of 10,800 charging ports. Once these ports are operationalized, there is significant scope for growth.
It’s worth mentioning that the company’s positive EBITDA has been on the back of a strong roll-out of ultra-fast charging networks. With continued focus on this segment, I expect margin improvement to be sustained. Of course, operating leverage will also boost key margins.
On the date of publication, Faisal Humayun 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