ChargePoint stock: Buy this stock ahead of upcoming earnings (NYSE: CHPT)
ChargePoint (CHPT) is the largest electric vehicle charging station company in North America with over 163,000 ports across the United States, Canada and Europe.
I’ve been extremely optimistic about this company since ChargePoint completed its SPAC merger despite a bumpy sell-off in the electric vehicle sector. To put it bluntly, electric vehicle stocks were crushed in November 2021 when billionaires like Elon Musk started dumping their tech stock holdings.
What’s next for Charging point ? Well, I mentioned in my previous CHPT article that more EVs on the road is a positive sign for EV charging companies.
There will be a lot of competition in the EV space between companies like Tesla (NASDAQ:TSLA), Lucid (NASDAQ:LCID), Rivian (NASDAQ:RIVN), Ford (NYSE:F), etc. However, I am buying shares of CHPT as a pick and axes play on the growing electric vehicle sector.
Nearly 6.5 million electric vehicles were sold worldwide in 2021 and I expect this number to increase significantly due to increased consumer awareness of renewable energy vehicles and word of mouth.
Here are some examples of explosive year-over-year growth:
|Company||Total 2021 EVs delivered||Annual growth|
|Ford||27,140||N / A|
Source: Author, with data from Seeking Alpha
What’s crazy is that this is just the start of a massive explosion in EV adoption. Traditional automakers such as GM (NYSE:GM) and Toyota (NYSE:TM) are working day and night to catch up with the competition. Canoo Inc (NASDAQ:GOEV), Lordstown Motors Inc (NASDAQ:RIDE) and Polestar Inc (NASDAQ:GGPI) will increase their production numbers this year and you’ll see many more sightings of electric vehicles on the road.
ChargePoint is a pure pick and shovel game about exponential electric vehicle adoption
ChargePoint is a software company that generates revenue from physical hardware sales and ongoing subscription revenue. The company uses an asset-light business model to increase revenue without incurring huge capital costs.
The most dominant company in any fast-growing industry tends to outperform the rest of the pack and produce superior returns for shareholders. Think of companies like:
- Tesla: leader in the electric vehicle industry
- Apple (NASDAQ: AAPL): Technology Industry Leader
- Alphabet (NASDAQ:GOOG): leader in online search
- Netflix (NASDAQ:NFLX): leader in paid online video streaming
Take a look at the returns of the aforementioned companies over the past 5 years and see for yourself.
It’s the same reason I’m so excited about Load Point. They have the opportunity to achieve similar returns within a new industry that is about to explode.
ChargePoint leads all other EV charging companies in total revenue
ChargePoint isn’t the only company tackling the EV charging market and even Tesla opened up its charging network to all EVs last year.
There are tough competitors but ChargePoint leads the market by far.
|Charging Point (NASDAQ: CHPT)||$204 million|
|EVgo (NASDAQ: EVGO)||$19 million|
|Volta (NYSE: VLTA)||$28 million|
|Flashing Load (NASDAQ: BLNK)||$15 million|
Source: Author, with data from Seeking Alpha
ChargePoint is expected to reach $378 million in revenue by 2023, which means CHPT stock is currently valued at a future price-to-sales ratio of 12.
ChargePoint has a plethora of competitors all wanting a piece of the EV industry. Tesla’s Supercharging Network is America’s biggest contender while other contenders such as Blink Charging and EVgo show promise.
Numerous The ChargePoint bears claim that the majority of ChargePoint stations are level 2 chargers instead of level 3 fast chargers.
It’s true that many consumers will charge their vehicle on the go, but most EV owners charge their vehicle at home overnight or during their shift. ChargePoint supports Level 3 chargers and has recently made acquisitions to increase revenue in Europe.
If Tier 3 load is the bulk of industry revenue in the coming years, then ChargePoint will have to invest a lot of capital to update its network. However, revenues continue to grow and I believe the business is moving in the right direction.
Another potential risk factor is the rise of solar-powered cars. New startups plan to produce vehicles that charge with solar energy without the need for a charging station.
Aptera will begin selling a solar-powered vehicle with a 400-mile range this year starting at $29,800.
The good news is that the costs of EV battery technology are falling every year and many consumers are happy with current EV charging options.
I look for high-growth companies with leading market shares in fast-growing industries when conducting my research for articles on Seeking Alpha. ChargePoint ticks all the boxes when it comes to strong management, revenue growth, market share, asset-light business model, and future revenue growth opportunities.
It may take a few years to ChargePoint to achieve profitability, but I think it’s worth the wait. Shares of CHPT are trading near the $10 range and Q4 2021 will reveal a lot about the company’s outlook for 2022.
Electric vehicle sales have skyrocketed in 2021 and that means ChargePoint should also have a great Q4 2021 earnings report. I’m really bullish on this business and can’t wait to see it grow.