Although the burgeoning electric vehicle (EV) market presents massive opportunities, investors may ultimately find a greater probability of success through charging network operators like EVgo (NASDAQ:EVGO). Bluntly speaking, individual EV brands won’t get very far without robust public infrastructure. Therefore, EVGO stock makes a better long-term case for the global EV rollout. I am bullish on the charging specialist.
EVGO Stock Rises on Substantive Financial Progress
Most investors recognize the upside potential of EV integration. However, the problem with individual EV manufacturers centers on a lack of financial substance. Consider the startup sector in this space, and you’ll see plenty of aspirational but pre-revenue enterprises. In contrast, EVGO stock benefits from tangible operational progress.
Recently, TipRanks reporter Sheryl Sheth said that shares of the charging network company popped sharply following solid results for its Fiscal Q2 2023 earnings report. Specifically, EVgo disclosed an increase in the number of drivers using its chargers, leading to an overall encouraging print.
Moreover, the company posted revenue of $50.6 million, representing a massive 457% increase on a year-over-year basis. Not surprisingly, this tally easily beat analysts’ consensus estimate calling for $29.45 million. Also, its eXtend unit, which offers charging infrastructure and solutions for businesses, contributed 66% of the expansion of sales growth. Nominally, the unit rang up $33.3 million in revenue.
On the bottom line, EVgo posted a diluted loss of 8 cents per share. Though this figure landed in red ink, it nevertheless mitigated analysts’ expectations, which called for a loss of 26 cents. However, in the year-ago quarter, the company posted diluted earnings per share of 6 cents.
Still, a key takeaway is that “the total amount of electricity provided to charging customers (network throughput) during Q2 grew 14% year-over-year to 24.9 gigawatt-hours,” wrote Sheth.
In contrast, individual EV makers are suffering challenges. For example, Tesla (NASDAQ:TSLA) recently incurred a slowdown in deliveries in China. Essentially, EV demand may slow from prior peaks until charging networks become adequate. That’s a huge addressable market for EVgo.
Fundamentals Point to a Favorable Direction
Although betting on a single EV manufacturing brand may yield far greater profitability potential, the likelihood of success is arguably limited. Fundamentally, individual brands must compete with other brands, convincing customers that their way is the superior path. On the flip side, every EV driver needs access to charging. Therefore, EVGO stock enjoys a brand-agnostic framework, making it exceptionally compelling.
To this point, charging network operators during the early phase of the EV rollout suffered timing issues. Because the first-generation EVs were quite pricey – and they still are, generally speaking – only affluent customers could afford them. These folks typically had access to a garage or carport, thus facilitating home charging.
However, as technologies advance and economies of scale rise, EVs should become more accessible to a larger consumer base. At that point, you’re dealing with a sizable segment of the population that lack garages or carports. Under this phase of the EV rollout, competition will be particularly fierce as brands would then have to combine quality with attractive pricing.
That said, the beauty of EVGO stock is that its shareholders don’t have to worry much about said competition. While the brands fight over sector dominance, they all would have one thing in common: their new middle-income consumers will need access to public charging. Given EVgo’s improving position in the industry, it’s no surprise to see its valuation swinging higher.
Also, it’s worth mentioning that public charging networks don’t just serve garage-less drivers. If anyone, irrespective of their housing situation, drives many miles for their occupation, home charging might not be robust enough. Further, those who like to travel across state borders for vacations will need public charging. Either way, EVGO stock benefits.
Is EVGO Stock a Buy, According to Analysts?
Turning to Wall Street, EVGO stock has a Moderate Buy consensus rating based on four Buys, three Holds, and one Sell rating. The average EVGO stock price target is $8.04, implying 67.5% upside potential.
The Takeaway: EVGO Stock Banks on a Common Need
More than likely, those who speculate on an individual EV brand enjoy greater reward potential. However, figuring out which brand will dominate represents no easy task. Further, as companies saturate the high-income population, competition will be fierce for the middle-income crowd. However, this segment will likely require vast public charging networks. That’s where EVGO stock stands to benefit handsomely, making it worth consideration.
