The question of the day seems to be whether or not ChargePoint Stock (CHPT) will recover from what seemed to be a cataclysmic fifty-percent fall in 2021. The key point it brings up is ChargePoint hasn't established itself as a profitable company yet as it seems to focus on top-line growth first. Furthermore, as a stock that has traded at a one-year low, it still sported a high price-to-sales ratio. However, despite this, it is believed by the U.S. government that electric vehicles (EVs) are still the future of transportation. EV units have shown significant signs of improvements over the year due to the rising costs of fuel consumption and environmental concerns. In order to drive EV growth among consumers, the bipartisan infrastructure law provided a $7.5 billion USD investment into the EV charging setups as the government strives to develop a network of at least 500,000 public charging stations by 2030. With these numbers taken into consideration, which sees a five-fold increase from the current roster of public chargers in the U.S. at the moment, this suggests the industry leader of the EV charger companies, ChargePoint Holdings, (NYSE: CHPT) should have no trouble shrugging off the 2021 stock drop that halved its value and likely sees 2022 as a year of recovery.
This is the same company whose stock rose by nearly three hundred percent during the second half of 2020. Can ChargePoint's CHPT stock do something like this again? In other words, are they still considered a solid long-term investment worth consideration? In ChargePoint's defense, as soon as they went public in March of 2021, the stock dropped by more than thirty-five percent. The year 2021 saw a number of EV-related companies experience stock price fluctuations that started off strong at the beginning of the year, only to nose-dive towards its end. Part of the problem was the lack of profits. It didn't help when ChargePoint announced in the third quarter that it lost a net $69.4 million USD. This exceeded the revenue it earned of $65 million USD. It was also announced there were no expectations to generate positive EBITDA until 2024, but this is because ChargePoint is primarily focused on top-line growth, which is a long-term point of view, not short-term. However, there are several other EV charging providers that are publicly listed and private that have been giving ChargePoint a good run for their money as top competitors.
For ChargePoint, their belief focuses on building a sizable customer base that will be able to generate higher profit margins via recurring software. The success of this plan, however, depends entirely on becoming a top EV charging provider that can offer quality and choices that will give customers a good reason to stay with ChargePoint. This serves as a huge gamble that may or may not pay off in the company's favor, not to mention their investors. However, with 163,000 charging ports located at a global level, which include 45,000 in Europe, ChargePoint's revenue jumped by seventy-nine percent in the third quarter, year over year. It also managed to raise its revenue guidance from $230 million USD to $237.5 million USD since the company's fiscal year-end, January 31, 2022. This is a software-as-a-service-focused company that earns more long-term revenue from its software sales rather than its hardware sales. Based on these numbers, it would appear the long-term investment potential of CHPT stock is favorable.
With so much focus poured on EVs, this has become a hotbed of activity, both good and bad. ChargePoint did change hands for just a little more than twenty dollars while shares were at their all-time high of $49.48 USD apiece. While this takes place, there are new companies that are throwing their hat into the EV industry dance. With this much interest pouring into the EV industry, it stands to reason many companies will crash and burn while others will rise above the ashes unscathed. Where does ChargePoint stand in this regard? For starters, ChargePoint and its CHPT stock are not in the EV manufacturing business, which is far more volatile at this time. What they're into is something critical as EVs are increasingly adopted into the infrastructure of how society goes about with transportation-related trends. Since becoming president of the U.S., Joe Biden has laid out a rather ambitious plan that includes an extensive charging network that will feature stations that will cater to the EVs. This $7.5 billion USD investment promised in Biden's bill does not cover the cost of building the network. According to AlixPartners, a consulting firm that has calculated the total cost of the global EV infrastructure to sit at $300 billion USD. This includes $50 billion USD for America. Over time, as EVs become more prevalent, it is the intent of the current U.S. government to invest heavily in the industry's development in order to meet all infrastructure-related targets. As it stands at the moment, ChargePoint has been named as the net beneficiary of the move towards EVs. As unstable as the stock market can be, the expected stability of CHPT stock sees a healthy pace of growth. It is not expected to see explosive growth like some of the meme stocks, but it is expected to be a long stay as a rock-solid company that shows promise.
2022 So Far
In its second-quarter fiscal 2022 earnings report, ChargePoint reported stellar numbers, which caused the CHPT stock to jump by nine percent. Revenue then soared by sixty-one percent in the quarter that reached $56.1 million USD. There is a favor for the types of facilities ChargePoint offers as an eco-friendly option for drivers worldwide. As climate change concerns grow, so does the demand for EVs, both as drivable units and as charging stations to cater to those units. The strength of the company continues to grow as the infrastructure of the EV charging systems continues to grow, the revenue went up by ninety-one percent to $40.9 million USD. It is expected ChargePoint's revenue should reach $230 million USD by the end of this year, which is up by $200 million USD from the prior projection.
Because of the chargers, this is where ChargePoint is making the big money, despite the fact they don't make any. The company's business model completely relies on demand-pull. In other words, each time a person accesses a charging station at your location, you get paid for each transaction. Because of this, businesses are seeing an increase in sales as more electric vehicles are showing up than ever before. This is a trend that isn't only expected to continue, but increases as more EV units become available to the public. From the outside looking in, ChargePoint's profit margins may seem low, but this is necessary in order to maintain the high-cost structure of the company. It spent $40 million USD on R&D in one quarter alone in order to develop the software solutions needed to keep up with subscription offerings. When looking ahead, there is a concern about dilution as the finances are required for the company to continue operations without encountering equity issues. Management has been tapping into this source of finance, striking while the iron is hot, so to speak. Stockholders who do their homework will not object to this strategy, at least short-term, for now.
Part of the problem that stemmed from 2021 that has also become 2022's problem is there are more people working from home than ever before. This means there are fewer people traveling about and fewer people parking their cars at office lots. This hinders the need for companies to purchase charging stations, which now creates a supply glut. This alone can compromise the value of CHPT stock. However, due to Freedom Convoys pushing for oppressive governments to put an end to COVID-related restrictions, this could serve as a turning point in what direction is the world going to go next. Should the type of change the convoys seek happen, that CHPT stock could be a steal since its steep drop as more people focus to put their lives back in order and come and go more freely than they had been doing for the past three years. Right now, ChargePoint has a solid lock as an ultra-competitive EV charging station option, which makes its CHPT stock share this strength. The world continues to push away from using fossil fuels, which sees the transportation industry undergo a transition period, all while ChargePoint has positioned itself as a major player in this new sense of global reality. The company's products allow EV vehicle owners greater access points to recharge whenever needed, as well as offering discounts on charging stations that agree to help move forward with a cleaner energy source. According to Yahoo! Finance, ChargePoint's CHPT stock has based itself for a better 2022 performance. This is because more car manufacturing companies than ever, even old-school companies such as Chevrolet, Dodge, and Ford, are committing themselves to steer away from using fossil fuel-reliant automobiles. However, in order to boost the confidence levels for more companies to go there, EV charging stations need to be just as easily accessible as the gas stations that make up part of the global landscape.
More About ChargePoint
According to Wikipedia, ChargePoint originally started out as Coulomb Technologies in 2007. By June 2017, it took over 9,800 EV charging stations from GE, which added to the company's roster of 34,900 charging stations that spanned across Australia, Canada, Mexico, and the United States. Pasquale Romano is the current CEO and president of the company, a position he earned as of 2018. In that same year, ChargePoint managed to raise $240 million USD. At this point, the company had control of 57,000 charging stations. When Volkswagen's Electrify America agreed to team with ChargePoint to provide common access to their U.S. customers in 2019, this rose the amount of charging stations to 100,000. Along the way, more than 2,000 charging stations, which also included stations set up at the Disney theme parks. Currently, ChargePoint has its headquarters located in Campbell, California, which is in the San Fransisco bay area. According to Prospero Events Group, and its list of Top 8 EV Charging Operators in the World, this company leads the EV charging world due to the inclusive and rapidly growing network of charging stations. Since the agreement has-to-be and ViriCiti as a means to boost their fleets even further, ChargePoint has since become the number one charging station service in Europe and North America. With over 200,000 roaming ports stretching across both continents, this is a huge and well-established network that has apparently managed to avoid approximately 450,000 metric tons of greenhouse gas emissions at a global level.
More About Charging Station
Charging stations, which are cited to eventually replace regular gas stations as we know it, have been popping up as an opportunity for drivers of electronic vehicles to plug in their units and recharge them so that it's ready to go again. These stations cater to hybrids and EV units with what has become a less expensive alternative to fossil fuel consumption. Most electric cars have an onboard AC-DC converter that makes it easy for EV units to plug into a charging station's connector. Most stations provide such connectors that can conform to a variety of charging standards and are commonly equipped with multiple connectors in order to accommodate a large variety of vehicles. Typically, charging stations are found on the street side or at large facilities such as government buildings, shopping centers, and parking areas. Through PlugShare, its website offers reliable information in regards to the locations of each registered EV charging station. When viewing the information provided by the website, should one own an EV unit, registering to the site with all the required information serves as a decent source to know where to go to recharge. It will also show where ChargePoint stations are located.
Written by Allen Lee
Read more posts by Allen Lee