The first six months of 2022 have been challenging for growth stocks. They have crashed and how! This means that there are a lot of fundamentally good stocks available at a nice discount. However, there are also stocks that have been sold off because of intrinsic issues.
There is a third category of stocks. These stocks have been hit massively by macroeconomic factors and will likely continue to remain subdued until the world scenario improves. Electric vehicle (EV) charging company, ChargePoint (NYSE: CHPT), is one such stock in the third category.
It's no secret that the world is moving towards EVs, and companies like ChargePoint that provide charging services to the sector have tremendous growth potential. However, ChargePoint stock has been steadily declining since it hit a peak of $46.1 on December 24, 2020. Its currently trading at $12.5, valuing the company at $4.2 billion by market cap.
Macro conditions remain challenging for ChargePoint
ChargePoint’s products include subscription revenues, networked charging systems, and professional services.
Post the pandemic, supply chain challenges, rising inflation, a surge in commodity prices, and Russia’s invasion of Ukraine have negatively impacted ChargePoint and other growth stocks. These events have caused key material prices for EV batteries to rise, impacting ChargePoint stock negatively.
That said, US President Joe Biden’s administration has announced that it intends to spend $174 billion to boost domestic EV manufacturing. The administration has also said that $7.5 billion will be spent on EV charging infrastructure and more than $7 billion on the critical minerals supply chains necessary for batteries, components, materials, and recycling.
A number of automakers have said that they intend to take their whole fleet electric by 2050, and 50% of all new vehicles sold in 2030 will be electric. Clearly, ChargePoint doesn’t lack opportunities.
A look at ChargePoint’s financial position
The company reported a loss of 21 cents per share in its latest quarter. Markets expected a loss of 19 cents per share in Q1. The company’s Q1 results were not well-received, but it is likely that ChargePoint will continue to bear losses until it hits scale.
For ChargePoint, revenue matters, and the company hasn’t disappointed here. Its revenue came in at $81.6 million, up 102% from $40.5 million in the corresponding quarter in 2021.
Its networked charging systems revenue increased 122% from $26.8 million in Q1 of 2021 to $59.6 million in Q1 of 2022. Comparatively, subscription sales rose 63% to $17.6 million from $10.8 million in this period. At $541 million, the company has enough cash to weather a couple of rough quarters.
ChargePoint is scheduled to release its earnings for the quarter ending July 31, 2022, in the middle of August. Its guidance says the company expects revenue to come in between $96 million to $106 million, up 80% from the same period in 2021. Full-year revenue guidance is at $450 million to $500 million, the midpoint is an anticipated increase of 96% from the previous year.
CHPT stock has solid potential
As of April 30, 2022, ChargePoint had over 188,000 activated charging ports in North America and Europe. It is the leading EV charging company in North America and operates in 16 European countries. It also has 320,000 ports accessible via roaming integrations.
As the company continues to expand its footprint, its subscription revenue should increase, which in turn will reduce losses and increase cash flow.
As sales of EV vehicles continue to rise, it is inevitable that the need for charging points will grow exponentially. ChargePoint is in a prime position to take advantage of this.
ChargePoint stock closed at $13.38 on July 8, and the average consensus target price for the stock is $23.93, a potential upside of almost 79%. While the upside is enticing, you have to take into account that there might be more pain in the short term. However, if you are a long-term investor, ChargePoint is an easy buy.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
