ChargePoint: Buy rackets despite the recovery

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Oleksandr Shkos

investment thesis

CHPT share price since the beginning of the year

CHPT share price since the beginning of the year

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ChargePoint Holdings, Inc. (NYSE:New York Stock Exchange: CHPT) unfortunately with a drop of -72.06% from the peak levels of $46.1 in pandemic outbreak levels. However, we remain optimistic about its aggressive approach and geographic expansion, since New car sales are still strong now. October CPI Reports continue to report demand picking up so far at 0.5% sequentially and 8.4% year-over-year, with most automakers unable to produce EVs fast enough for the mounting backorders. general motors (GM) Recently 1 meter of electric vehicle production capacity By 2025, with Ford (F) drive towards more ambition 2 million by fiscal year 2026. With more and more electric vehicles on the road, it’s no wonder Mr. Market recognizes the enormous value and importance of CHPT over the next decade.

Bloomberg also predicted that annual sales of electric vehicles will reach a record high of 20.6 million by 2025, accounting for 23% of all new car sales at that time, up from 9% in 2021. The European Union will also account for a large part of this demand, The EU government expects to install 1 million charging stations by 2025, to meet the explosive 21-fold growth in electric vehicles on the way to 30 million by 2030, compared to 2022 levels of 1.4 million. Therefore, in order to understand CHPT’s strong expansion into the EU market, with the acquisition of ViriCiti BV in August 2021, the acquisition of gmbh in October 2021, and the launch of the CP6000 for scalability and flexibility in global freight solutions should take place.

By October 2022, CHPT already operates over 200,000 charging points in North America and 16 countries in the European Union, indicating a whopping 69.49% year-on-year increase in the installed network port base. Notably, 30% of them are in the EU, with the administration directing further expansion over the next few years, in order to catch the huge surge in demand once the overall economy picks up by 2024. That’s really impressive, as it’s also expected to expand The global electric vehicle market will reach $823.75 billion in value by 2030, at a compound annual growth rate of 18.2%.

CHPT continues to experience temporary margin headwinds

CHPT Revenue, Net Income ($ Million) %, EBIT %, and EPS

CHPT Revenue, Net Income ($ Million) %, EBIT %, and EPS

Standard & Poor’s Capital IQ

On its upcoming FQ3’23 earnings call, CHPT is expected to report revenue of $132.1 million and EBIT margins of -58.2%, indicating massive quarterly growth of 21.97% and 25.3 percentage points, respectively. Otherwise, Mumtaz recorded 203.23% and 42.2 percentage points year-on-year respectively, despite the tougher year-on-year comparison.

On the other hand, CHPT’s profitability is still a long way off, with net income of -$60.8 million and net income margins of -46% in the following quarter, which represents minimal improvements on a quarterly and year-over-year basis. Thus, he explains the expected earnings per share of $0.18.

Total number of CHPT shares and SBC expenses ($ in million)

Total number of CHPT shares and SBC expenses ($ in million)

Standard & Poor’s Capital IQ

Increasing inflationary pressure is negatively affecting CHPT’s gross margins, which is part of the reason for its continued unprofitability. By the second quarter of 2013, it posted gross margins of 16.8%, indicating notable declines from FQ3’22 levels of 24.7% and FQ3’21 levels of 19.9%. Further, the company also increased its reliance on stock-based compensation to $73.41 million over the past twelve months (LTM), which is a whopping 89.59 percent increase sequentially. Thus, worsening its profit margins and diluting its shareholders by 49.34% since its March 2021 IPO.

CHPT Cash/Equivalent, FCF (in Million Dollars)%, Debt

CHPT Cash/Equivalent, FCF (in Million Dollars)%, Debt

Standard & Poor’s Capital IQ

Combined with its huge capital expenditure of $17.5 million over the given term, indicating a sequential increase of 31.48%, it is no wonder CHPT is not expected to report positive free cash flow (FCF) generation by FQ3’23. However, investors need not lose heart because the company is starting to narrow the gap, as is evident since FQ3’21. Additionally, these investments have also been accretive above and below earnings, as shown above, and will likely continue over the next decade.

On the flip side, CHPT is likely to raise more capital in the short term, due to the diminished cash and equivalents of $187.7 million from last quarter. Especially given the macroeconomic deterioration and the Fed hike until 2023.

CHPT’s Projected Revenue, Net Income (in $M)%, EBIT%, and EPS

CHPT's Projected Revenue, Net Income (in $M)%, EBIT%, and EPS

Standard & Poor’s Capital IQ

CHPT forward execution, meanwhile, has remained solid for the time being, with no downgrades from market analysts, since our previous analysis in June and September 2022. Obviously, Mr. Market remains very confident about its growth through fiscal 2025, at an annual rate of growth. An impressive composite of 67.3%, significantly accelerated from pre-pandemic levels of 52.85% and pandemic levels of 29.14%. Excellent, despite the impact of recessionary peak fears and the perceived destruction of demand.

CHPT Expected FCF ($ Million) % Net Debt

CHPT Expected FCF ($ Million) % Net Debt

Standard & Poor’s Capital IQ

In the meantime, investors should also moderate their expectations about CHPT’s profitability, given that the company remains in growth territory throughout its cost stages. Net income and profitability of cash adjustment will remain elusive through fiscal 2025, indicating the need for additional debt build-up by fiscal 2024 and 2025, as evidenced by the increased net debt levels we expect at that time. However, these amounts seem reasonable so far. we will see.

In the meantime, we encourage you to read our previous article on CHPT, which should help you better understand its positioning and market opportunities.

  • ChargePoint: This lightning charging won’t last
  • ChargePoint: the hidden ace in the electric car war

So, do you buy CHPT sharesOr sale or contract?

CHPT 2Y EV/Revenue and P/E Values

CHPT 2Y EV/Revenue and P/E Values

Standard & Poor’s Capital IQ

CHPT currently trades with an EV/NTM of 6.74x and an NTM P/E of -19.39x, below the average 2Y EV/Revenue of 19.75x although significantly improved from the average 2Y P/E of -44.97. x. The stock is also trading at $12.88, down 55.15% from its 52-week high of $28.72, though it’s a premium of 51.52% from its 52-week low of $8.50. However, consensus estimates remain bullish on CHPT’s prospects, given its price target of $24.79 and up 92.47% from current prices.

Besides the factors discussed above, we would classify CHPT stock as a speculative buy, despite its recent gain of 14.69%. The S&P 500 has already moderately recovered 10.67% from the recent market bottom in mid-October, indicating Mr. Market’s increasing optimism for a soft landing through 2023.

Naturally, CHPT investors adding at these levels should be willing to tolerate more volatility in the short term, depending on the Fed’s December speculative pivot. We’re more optimistic, however, given that the company remains one of the global leaders in the electric vehicle charging network market, with a massive runway for adoption and growth over the next decade. Moreover, 85.4% of market analysts are already expecting a 50bps rally next, reflecting the BoC’s recent moderation. Combined with the fact that CHPT is trading attractively below its 50-day moving average, the stock could easily be outperformed in the future.