Though EVs represent exciting upside potential, they also present wild variabilities. Thus, investors should consider ChargePoint (NYSE:CHPT) stock (currently 77% off its highs), which theoretically offers a more predictable, brand-agnostic investment. I am bullish on CHPT stock long term, although investors should prep for a choppy ride.
In all likelihood, investors who bank on individual EV brands stand poised to gain the greatest return — assuming, of course, that the target brands rise above the others. Unfortunately, the downturn of 2022 and the subsequent pressures on the consumer economy exposed the contenders from the pretenders. What’s worse, even the contenders suffered sharp losses last year.
To be fair, even infrastructure plays like ChargePoint did not receive an exemption from volatility. Thus, investors considering CHPT stock should be forewarned: this will likely not be an easy trade by any stretch of the imagination.
At the same time, from a narrative standpoint, ChargePoint essentially offers tickets to the big game. In contrast, those who bank exclusively on individual EV stocks are betting on which team will win. Though infrastructural plays offer less emotional exuberance, CHPT stock and its ilk bring more credibility to the table.
CHPT Stock Doesn’t Have to Blink First
While seemingly everyone wants to rush into the EV space, it’s important to consider the sector’s chicken-and-egg conundrum. For EVs to truly flourish, the infrastructure must be available. On the other end, for infrastructure providers to justify their enormous investments, EVs must flourish. So, which side will blink first?
The EV sector may be unique in that the eggs have already hatched. With sector leader Tesla (NASDAQ:TSLA) demonstrating the viability of EVs – at least for the well-to-do demographic – hordes of would-be competitors jumped on board. In other words, individual EV brands are eager to introduce their electric-powered cars to the world, boding well for CHPT stock.
The current run of EVs represents the first wave of soldiers charging the hill, but the average price of a new EV is too far high up the scale for most households. Therefore, the present batch of exciting EVs that sport price tags approaching and sometimes over six digits will whet the appetite of the affluent.
Eventually, though, the average consumer will want to get in on the action. Thanks to economies of scale – particularly from the big guns like General Motors (NYSE:GM) leading the charge – the second wave of EV production should target those of more realistic means, and this wave will likely boost CHPT stock over time.
Fundamentally, while 66% of all U.S. housing units have a garage or carport (as per the 2017 American Housing Survey), that leaves quite a few that don’t. For the garage-less, home charging will likely not be an option. Thus, ChargePoint’s public infrastructure business may prove lucrative. Additionally, the company can target apartment and condominium complexes to integrate charging capabilities in their parking lots.
Banking on the Narrative
If the above narrative sounds appealing, then interested investors must depend on it for some time. Unfortunately, CHPT stock doesn’t offer much encouragement on the fiscal side of the coin, at least not yet.
While ChargePoint is hardly a pre-revenue company, it’s deeply unprofitable. For instance, in the quarter ending October 31, 2022, the company posted $125.3 million in revenue. However, its operating loss came out to $83.3 million, and its net loss pinged at $84.5 million. In terms of the retained earnings line item, investors will see $1.08 billion in the red.
Regarding quantitative data points, the market prices CHPT stock at 9.8 times sales and 11.5 times book value. Both stats rank well into extremely overvalued territory relative to the underlying industry — the industry medians are 0.7 times and 1.5 times, respectively. About the only objective positive for CHPT stock financially is its balance sheet, which features middling strength.
To be sure, CHPT stock ranks among the speculative market ideas. However, it does enjoy strong support among Wall Street analysts. Conspicuously, none of the covering experts have yet to rate ChargePoint as a Sell, which may offer some encouragement.
Is CHPT Stock a Buy, According to Analysts?
Turning to Wall Street, CHPT stock has a Strong Buy consensus rating based on six Buys, two Holds, and zero Sell ratings. The average CHPT stock price target is $19.38, implying 69.9% upside potential.
Conclusion: CHPT is a Long-Term Play That Could Pay Off
With so many competitors in the EV space, it’s difficult to know which one will win. However, as the arena transitions from rich folks’ toys to legitimate transportation platforms for all, public charging infrastructure will rise in demand. That sets up CHPT stock nicely, assuming the underlying enterprise can survive long enough.
