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ChargePoint: Infrastructure Bill May not Spark Stock Surge

The United States Senate has passed the highly anticipated $1-trillion infrastructure bill.

As part of this bill, President Joe Biden has signed an executive order that will help boost the EV manufacturing sector. As per the bill, the government will set aside $7.5 billion to set up a wide network of EV charging stations. 

This infrastructure bill has become a highly touted catalyst underpinning the rise of various EV infrastructure stocks. ChargePoint (CHPT) is the biggest within this peer group.

That said, investors are proving to be cautious right now. House speaker Nancy Pelosi has stated the House won’t vote on this bill until the Senate passes a separate $3.5-trillion spending bill focused on targeting other social measures. Accordingly, it may take months, if ever, to see this bill passed by the House.

Thus, it’s perhaps no surprise to see ChargePoint stock suffer a massive decline of more than 40% this year. (See CHPT stock charts on TipRanks)

Accordingly, investors may be wondering if this is the dip they should be buying, or if there’s more downside potential with this stock.

Here’s why the latter may be likely, at least in the short-term. I am bearish on this stock.

Insider Selling not Helping ChargePoint Stock

This EV charging stock has been dropping rather steadily in recent weeks. After rising to more than $35 in late June on anticipation of this infrastructure bill, investors seem keen to sell. Currently, investors can scoop up ChargePoint stock for just over $20 per share.

One of the major factors responsible for this fall was a secondary share offering by insiders. Insider selling can signify that insiders are content to take some money off the table. Generally speaking, this is not a bullish sign for those looking to put fresh capital into said stock.

Indeed, there’s likely a lot of growth on the horizon for EV charging stocks. However, investors may be concerned with a lack of visibility into when these companies will be cash flow positive. Showing a profit (even an adjusted profit) may prove to be just as tricky.

Accordingly, this is a stock for aggressive-growth investors only right now. It appears those looking at the fundamentals are having a hard time buying into the investment thesis for ChargePoint. Until this valuation becomes more tenable, that’s likely to remain the case.

ChargePoint Making Smart Moves, but Investors Seem to be Balking

The funding for EV charging infrastructure through the recently passed bill might be beneficial for CHPT. As of now, there are 41,400 charging stations across the U.S. However, only 5,000 of them are fast-charging stations. 

Apart from the federal funding, there have been other major developments that can positively impact ChargePoint. The EV charging company has recently acquired ViriCiti, a European electric fleet manager. In addition, it has forged many partnership deals. These deals will enable the company to eliminate any serious threats from competitors like EVgo (EVGO) and EVBox.

However, these factors may not be substantial enough to whip up investor interest at a time when insiders are selling stock.

What Are Analysts Saying about CHPT Stock?

As per the rating consensus among TipRanks analysts, ChargePoint stock comes in as a Strong Buy. Out of eight analyst ratings, there are seven Buy recommendations and one Hold recommendation. 

The average CHPT price target is $35.75. This price target ranges from a low of $24 to a high of $46 per share.

Bottom Line

ChargePoint’s market opportunity and growth potential are quite significant. However, ChargePoint appears to be a stock that has gotten ahead of its fundamentals right now.

Long-term growth investors may indeed be proven right by investing in this hyper-growth play. However, should the market turn increasingly cautious, ChargePoint stock may not be the best place to be heavily invested in over the medium-term.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article

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