ChargePoint Stock: Buy, Sell, or Hold?

ChargePoint (CHPT), a leading provider of networked charging solutions for electric vehicles (EVs), has been a subject of debate among investors due to its recent stock performance. After going public in March 2021, ChargePoint's stock price has plummeted from its opening price of $32.30 to around $1.00. This decline has raised questions about whether investors should buy, sell, or hold this EV infrastructure stock. To make an informed decision, let's analyze ChargePoint's business, recent performance, and future prospects.

ChargePoint's business model revolves around building and managing EV charging stations for residential and commercial customers. As of its latest quarter, it directly manages 329,000 charging ports in North America and Europe, serving around 80% of the Fortune 500 companies. However, ChargePoint faces intense competition from Tesla's Superchargers and smaller challengers like EVgo.

ChargePoint grew rapidly in fiscal 2022 and 2023 as the EV market recovered from the pandemic, but its growth slowed in the past two years due to rising interest rates and increased competition. The company remains unprofitable on a generally accepted accounting principles (GAAP) basis, with its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) staying negative.

MetricFY 2022FY 2023FY 20249M FY 2025Revenue$242 million$468 million$507 million$315 millionGrowth (YOY)65%93%8%(19%)Operating margin(110%)(73%)(89%)(63%)Net income (loss)($299 million)($345 million)($458 million)($218 million)Adjusted EBITDAN/A($217 million)($273 million)($99 million)Data source: ChargePoint. YOY = Year-over-year.

For fiscal 2025, ChargePoint expects its revenue to decline 17% to 19%. Analysts expect its revenue to dip 18% to $416 million, but they also expect the company to narrow its GAAP net loss to $270 million as its adjusted EBITDA improves to negative $127 million.

Reasons to sell or avoid ChargePoint's stock:

1. Shift from AC to DC chargers: ChargePoint's shift from AC to DC chargers has compressed its near-term gross margin due to the lower margins associated with DC chargers. This shift is expected to continue, potentially impacting the company's short-term financial performance.
2. Lack of profitability: ChargePoint has not yet achieved profitability on a GAAP basis, and its adjusted EBITDA is expected to remain negative until fiscal 2027. This lack of profitability may concern some investors.
3. Stock dilution: ChargePoint has increased its number of outstanding shares by 59% since its public debut to cover stock-based compensation and secondary offerings. This dilution could continue as the company tries to expand its lower-margin fast-charging network in a tepid EV market.

Reasons to buy or hold ChargePoint's stock:

1. Growth potential: Analysts expect ChargePoint's revenue to grow at a compound annual rate of 7% from fiscal 2024 to fiscal 2027 as the macro environment stabilizes, the EV market warms up again, and it expands its Level 3 charging network.
2. Strategic partnerships: ChargePoint's partnership with General Motors, which directs its EVs to ChargePoint and EVgo's networks, could generate additional tailwinds for revenue growth.
3. Strong balance sheet: ChargePoint held $220 million in cash and equivalents in its latest quarter, with no debt maturities until 2028 and an undrawn $150 million revolving credit facility. This strong financial position should provide the company with the flexibility to navigate any short-term challenges.

In conclusion, ChargePoint faces several headwinds, including its shift from AC to DC chargers, lack of profitability, and stock dilution. However, the company's growth potential, strategic partnerships, and strong balance sheet make it an attractive investment opportunity for long-term investors. As the EV market continues to grow and ChargePoint expands its charging network, the company's stock may rebound. Therefore, investors may want to consider holding or buying ChargePoint's stock, but they should be prepared for potential short-term volatility.