Electric vehicles might not be commonplace right now, but nobody argues with a forecast predicting they are destined to become a mainstream mode of transport over the next decade.
Boosted by government mandates, improving vehicle range, a growing number of cheaper vehicle options from legacy and new automakers, plus the appeal for consumers of low emission vehicles, Stifel’s Stephen Gengaro expects a “sharp rise in electric vehicle sales over the next several years.”
This new industry needs supporting infrastructure, and charging stations are likely to start popping up all over the place. According to Bloomberg, by 2030, spending on EV charging infrastructure in the U.S. and Europe will reach $60 billion and more than $190 billion by 2040. By then, there will be a need for over 300 million chargers.
One company here appears ahead of the game. “ChargePoint (CHPT) is a market leader in the EV charging industry, with a 73% market share of networked level two charging,” Gengaro noted. “This market share is over seven times greater than the closest competitor.”
Not to mention, since its inception in 2007, the company has generated over 92 million charges, in the process displacing 387,000 metric tons of harmful emissions.
Also standing in ChargePoint’s stead is a “capital light business.” The company’s charging solutions consist both of networked hardware and recurring software subscriptions & services. These are mostly used by fleet and commercial applications, and the network is managed for a recurring fee, with revenue “not tied” to charging time or the cost of electricity. “This approach leads to a capital light model with a strong recurring revenue base,” says Gengaro.
The capital-light method should also be a boon for FCF generation, despite the company’s continued R&D investments in the pursuit of delivering “leading-edge technology.” As such, driven by growing revenue and margin expansion, Gengaro anticipates ChargePoint will begin generating positive free cash flow in 2024.
So, good news for EVs and ChargePoint’s balance sheet, but what does it all mean for investors? Gengaro initiated coverage of CHPT stock with a Buy rating and $29 price target, suggesting room for share appreciation of 46% over the coming months. (To watch Gengaro’s track record, click here)
Most analysts agree although a few beg to differ; based on 8 Buys vs. 3 Holds and 1 Sell, the consensus view is that this stock is a Moderate Buy. Gengaro’s price target appears a conservative one when compared to his colleagues’ forecast; shares are expected to add 68% of muscle in the year ahead, given the average price target stands at $33.5. (See CHPT stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
