Will strong EV demand spark a post-earnings rally in ChargePoint shares?

The ChargePoint share price has slumped throughout 2022 so far. While the company is yet to turn a profit, it did report record revenues earlier this year, which could mean that the electric vehicle charging network is set for a first-quarter earnings beat. In the longer term, the company is well-positioned to benefit from the gradual consumer switch to EVs.

It’s been a volatile year for stocks, particularly for companies in the electric vehicle (EV) sector such as ChargePoint [CHPT]. Shares in the company, which specialises in charging electric vehicles, have sunk over the past few months. As it prepares to report its first-quarter fiscal 2023 results on 31 May, investors will be watching closely to see if its stock can recover its losses.

Analysts polled by Zacks Equity Research are expecting the California-based company to post a quarterly loss of $0.17 per share, which would reflect a year-over-year upturn of 5.6%. Revenues, meanwhile, are forecast at $75.1m, a steep 85.4% hike from the year-ago quarter. At its last earnings release back in February, ChargePoint predicted revenue of $72–77m for the quarter.

Despite positive forecasts, the ChargePoint share price has plunged 43% year-to-date, closing at $10.79 on 25 May, down from $19.05 at the end of 2021. A storm of factors, including the ongoing Ukraine-Russia war, rising interest rates, supply-chain issues and a general move away from growth stocks will have played a part.

Room for growth as the EV industry expands

The EV sector is expected to expand as fuel prices rocket and motorists make the switch from petrol-based cars to clean energy. However, many charging station companies, including ChargePoint, are not yet in profit. ChargePoint is also up against the fact that leading EV maker Tesla [TSLA] has its own charging network.

On 4 April, ChargePoint announced that Antara Capital was making a $300m investment in the company through the purchase of convertible senior notes, a move that will dilute existing shareholders. During the week of the announcement, ChargePoint’s stock dived by 18.4% to the close on Friday 8 April.

Overall, however, ChargePoint’s business seems set to grow. It already provides a network of thousands of charging points in Europe and the US, including its DC fast charger. A $10m deal with the Colorado Energy Office includes the creation of 20 fast charging sites to create six ‘highway corridors’ where residents can travel long distances in an EV. The first was completed in April.

Giant leaps for ChargePoint revenues in 2022

In February, ChargePoint released positive fourth-quarter and full fiscal year 2022 results. It reported that its quarterly earnings had rocketed by 90% year-over-year to $80.7m, up from $42.4m. Revenue was $242.3m for the full year, a hike of 65% from $146.5m in the previous year. The company reported a loss of $1.49 per share for fiscal 2022, a vast improvement on its loss of $18.14 in 2021.

“ChargePoint delivered another outstanding quarter, exceeding the high end of both our quarterly and annual revenue guidance and advancing our technology leadership in our commercial, fleet and residential verticals across North America and Europe,” Pasquale Romano, president and CEO of ChargePoint, said at the earnings release.

The company said that ​​over 174,000 ports had been activated since the end of January, with approximately 51,000 in Europe. It added that it anticipated annual revenue between $450m and $500m for fiscal year 2023. However, ChargePoint says it doesn’t expect to generate positive EBITDA before 2024.

Analysts call ChargePoint stock a ‘buy’ — but cut targets

ChargePoint might be experiencing a decline in its share value, but in the longer term should benefit from the shift towards electric and renewable energy sources.

The full impact of President Joe Biden’s infrastructure spending bill, which calls for $5bn to be spent on US EV charging infrastructure, is yet to be seen. In 2021, the worldwide EV market was worth an estimated $185bn, a figure predicted to soar to $980bn by 2028, with a CAGR of 24.5%. The market for EV charging infrastructure is expected to rise even faster, reaching $147.94bn by 2030, up from $5.64bn in 2020, with a CAGR of 38.6%.

For now, though, ChargePoint is waiting for EVs to become a mass market reality. It’s also worth noting the company doesn’t make money from the electricity consumed at charging points, only from selling and maintaining them. 

Bill Peterson, an analyst at JP Morgan, recently cut his price target on ChargePoint stock from $22 to $18 and maintained an ‘overweight’ rating. Peterson forecast “lingering margin pressures and potentially slower near-term growth” but had a more positive outlook on ChargePoint’s mid-term success.

Among 19 analysts polled by CNN, 13 suggest to ‘buy’ the stock, with six ‘hold’ ratings. A consensus of 18 analysts offering 12-month price targets suggest a median of $24, which would represent an upside of 103.2% on its 26 May closing price.