Shares ChargePoint Holdings (NYSE: CHPT), a U.S. provider of charging networks and solutions for EVs, have fallen sharply in the past 12 months, by more than 55%, and have so far underperformed all these EV stocks.
Despite the sharp fall in the share price, investors should remain confident in their holdings as it is expected to recover strongly based on sector outlook. Thus, I am bullish on this stock.
From Campbell, California, the company offers EV charging solutions for a variety of scenarios. The devices are designed for residential use and for charging commercial EVs and transport fleets.
The company operates hundreds of thousands of access points to charge EVs in North America and Europe.
Q3 Results
In the third quarter of fiscal 2022, which ended October 31, 2021, total revenue grew nearly 80% year-over-year to $65 million because of a significant increase in demand for charging network and solution services in the North American and European markets.
Network charging accounted for 73% of total revenue, while subscriptions and other revenues together accounted for the remaining 27%. Year-over-year, network charging revenue was up 111%. Subscription revenue also increased, but at a slower growth rate of 24%.
Third-quarter revenue exceeded analysts’ average forecast by approximately $1.8 million.
This revenue growth was strong, but still not enough to generate a positive net income result as the company posted a net loss of $0.21 per share, and missed the analysts’ average estimate by $0.05.
Positive Sector Outlook
The profit is on track to appear once the company has completed its ramping-up phase and has matured a bit more. In last quarter’s data, we saw a continued improvement in gross margin to 25% of total revenue (up 500 basis points year-over-year), giving shareholders hope.
The company is well-positioned in the EV sector, as its technology supports the governments of the United States and the European Union in replacing half of the existing internal combustion engine fleet with EVs by 2030.
To cope with the surge in demand for EV chargers, the company has pursued an acquisition-led growth strategy that appears to be responding well, as evidenced by the continued growth of sales and gross profit margins.
The company expects revenue of $73 million to $78 million for the fourth quarter of fiscal 2022, and total revenue of $235 million to $240 million for the full Fiscal Year 2022.
Wall Street’s Take
In the past three months, nine Wall Street analysts have issued a 12-month price target for CHPT. The company has a Moderate Buy consensus rating, based on six Buys, three Holds and zero Sell ratings.
The average ChargePoint Holdings price target is $30.22, implying 70% upside potential.
Summary
The stock has disappointed in the past year, but it seems well on the way to recovery. The ongoing improvement in gross profit margins will lead to a positive result of net income. It’s only a matter of time, but it shouldn’t take much longer.
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Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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