The same essential question regarding ChargePoint (NYSE:CHPT) stock remains: Does it make sense to invest in the EV charging infrastructure now that the industry has cooled?
There is a strong argument that markets got ahead of themselves in 2020 when everything EV seemed gold-plated.
But there is also a reasonable argument that ChargePoint‘s current price represents a good entry point.
After all, if EV growth lives up to its billing, ChargePoint will be a strong company given its established position in EV infrastructure.
CHPT Stock and Tesla’s Wake
Tesla has certainly been the driving force in market adoption of EVs. The company is the pioneer of the sector. And so, as it goes, so goes the market for EVs.
Tesla shares lost a lot of value in the period from Feb. 8 to March 8. Tesla shares dropped from $863.42 all the way down to $563 in that four-week span. That’s a decrease of nearly 35%. Tesla’s back to trading near $710 as I write this.
ChargePoint is not quite following suit. Or at least not yet anyway. ChargePoint more than halved in price between Feb. 9 and March 25 and is down more than 15% over the last five days.
The point is that capital has already returned to Tesla. ChargePoint isn’t nearly as important to the EV industry, so capital will return to it at a slower rate.
Therefore, it could be a great time to buy in. A recent Barron’s article highlighted ChargePoint along with three other EV-charging stocks at what it referred to as ‘fire-sale prices’.
Catalysts Didn’t Stick
Unfortunately for ChargePoint, recent news which looked certain to get the company back on track didn’t pan out for long. President Biden revealed his American Jobs Plan on March 31. It includes a great deal of spending ($174 million) on the EV market and a planned national network of 500,000 chargers by 2030.
That was enough to send CHPT stock prices up for a week, but they’ve since been trending downward for the last week. Prices are back where they were before Biden released his plan.
So, although the investment thesis is there, it hasn’t panned out for CHPT stock as pundits thought it would.
I believe that ChargePoint is going to rise when it proves more in terms of financial results. The onus is on the company at this point.
Investors are shifting to value across the market and away from more speculative plays like ChargePoint. Future promises are one thing, but current results are what investors really want.
The Bottom Line
Look into ChargePoint’s 10-K and you’ll find that it recorded a loss of nearly $5 million in 2020. That might not have mattered much at the beginning of 2021, but it certainly seems to matter more now.
ChargePoint came to market via the special purpose acquisition company (SPAC) route back in 2020. The market couldn’t get enough of anything SPAC EV-related then. But the market is much more skeptical now that it understands that SPACs allowed companies without revenues (not true in ChargePoint’s case) or even commercially viable products (also not true in ChargePoint’s case) to go public.
The hardware, software and services that ChargePoint bases its business on are what matters going forward. How much money it can make from them, and how quickly, really matter now.
The company outlined that it doesn’t anticipate becoming EBITDA positive until 2024. Investors have to consider that along with everything else now.
Long-term optimism still abounds for EVs, but I would simply hold CHPT stock right now.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.