We’ve seen a brutal bear market tear through growth stocks. While that has helped shake out some weak hands, it has also brought down high-quality stocks too. For instance, ChargePoint (NYSE:CHPT) is down massively from its highs, as investors dump CHPT stock and its peers.
While that shakeout is necessary after such a big run, it also weighs on some of the better stocks out there. Although those losses don’t feel fair, it actually creates opportunity — with a caveat.
That caveat is that investors are patient and focused on the long term, not sweating each day or focusing on the tick-by-tick action.
Those that can separate those feelings, mute their emotions to a degree and hone their focus to the long-term will come out on top. That doesn’t go for CHPT stock alone — it goes for investing in general.
So what makes ChargePoint so interesting? Let’s look.
Breaking Down CHPT Stock
The company was founded in 2007, so it’s not a flash-in-the-pan new arrival looking to take advantage of a hot trend and make a quick buck. The company has more than 132,000 charging locations in North America and Europe. That number swells to almost 160,000 locations when taking into account integrations with other networks.
Further, ChargePoint has “more market share (at more than 70%) in networked level 2 charging than the closest competitor in North America.”
More importantly, it has the “largest online network of independently owned EV charging stations operating in 14 countries and makes the technology used in it.” As the trends in EV continue to push further, so too does business for ChargePoint. Consensus expectations call for solid growth as a result.
| Fiscal Year | Revenue (in millions) | Growth (YoY) |
| 2021 (finished) | $146 | 1.3% |
| 2022 | 204 | 39.7% |
| 2023 | 345 | 69.1% |
| 2024 | 605 | 75.3% |
| 2025 | 910 | 50.4% |
The opportunity here is clear, but so too is the risk. While these estimates are promising, let’s keep in mind that 2021 generated roughly flat growth. These estimates also go out several years, which presents the risk of being inaccurate. There are also only a handful of analysts covering this name, which makes the consensus more prone to potential inaccuracies.
That said, the opportunity is massive. If we can see 40% growth this year, then 69% next, then 75% in the following year, we are talking about several years of strong and accelerating growth.
If this company is doing almost $1 billion in revenue in just a couple of years, I believe it’s undervalued today.
EVs Driving the Momentum
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There has been an enormous push toward electric vehicles (EVs). That’s evident by new entrants, momentum in the stocks and in vehicle sales. Heck, the largest EV producer in the world just said it’s sold out for the quarter already. At one point, its market cap swelled to the point where it was larger than every other automaker in the world.
To some extent, that’s a sign that we should be more cautious in the short term. On the other hand, it’s an encouraging sign for the long term.
More and more drivers are realizing the benefits to EVs. Longer driving ranges are easing what’s referred to as “range anxiety,” but so too is ChargePoint.
As more EVs come to market from more producers, consumers will inevitably need more charging stations. The leading EV producer in the U.S. built its own network for its customers. At the time, it needed to, to help persuade customers to buy its vehicles.
However, just as each automaker does not build its own gas stations, we don’t expect them to each build their own charging stations either. That’s where ChargePoint comes into play. Plus, with the new White House Administration looking at a huge infrastructure bill, it’s possible that ChargePoint catches a boost from increased spending in this area as well.
At the end of the day, this what really has us excited about CHPT stock (from ChargePoint, bold emphasis added):
“The company has an established, capital light business model with growth that is directly proportional to rapidly increasing EV penetration … With the total cumulative investment in EV charging infrastructure in the United States and Europe expected to be $60 billion by 2030* and $192 billion by 2040*, ChargePoint’s established business model, comprehensive portfolio for nearly every charging scenario today, recurring revenue, and growing customer base demonstrate it is well positioned to continue to lead as the electric mobility revolution accelerates.”
That’s got us feeling pretty good about the future. With shares down about 60% from the highs, it seems like an opportune time for bulls to begin accumulating the stock. While the losses are startling at first glance, there has been a lot of risk removed from the stock after the recent correction.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (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.
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