As governments across the globe align policies to reduce carbon emissions, the electrification of transport and mobility is the future. Recently, the Federal Highway Administration of the U.S. Department of Transportation announced a new program to reduce carbon emissions.
Pete Buttigieg, U.S. Transportation Secretary stated, “As the sector generating the most carbon emissions in the U.S. economy, transportation must play a leading role in solving the climate crisis.”
Under the new carbon reduction program, $6.4 billion will be offered to states and localities over the next five years to cut carbon emissions and develop infrastructure that supports the electrification of mobility, including charging infrastructure.
With favorable policies and the U.S. government spending on EV charging infrastructure, let’s look at two EV charging company stocks that, according to TipRanks’ database, have at least 40% upside potential.
EVgo (NASDAQ: EVGO)
EVgo provides a fast-charging network for EVs and owns more than 850 charging locations. Its partnership with OEMs (original equipment manufacturers), automakers, and large fleet operators positions it well to capitalize on the electrification of mobility.
Secular tailwinds, a large addressable market, product innovation, strong network throughput growth, and new partnerships could continue to support its financial and operating performance.
Evercore ISI analyst James West is bullish on EVGO stock and expects it to more than double from current levels. The analyst stated, “As a pure play on owner-operated public DCFC (Direct-current Fast charger) and charging as a service, EVgo is well positioned to benefit from the rapid growth underway in public EV Charging with its leverage to the mega-theme of the electrification of mobility.”
EVGO stock has received three Buy, three Hold, and one Sell recommendations for a Moderate Buy consensus rating. Further, the average EVGO price target of $14.20 implies 42% upside potential from current levels.
ChargePoint Holdings (NYSE: CHPT)
Leading EV charging network ChargePoint is poised to benefit from the strong electrification trend. Its asset-light business model, diversified revenue base, growing scale, and wide range of products targeting fleet and residential customers provide a strong foundation for growth.
During the Q4 conference call, ChargePoint’s CEO, Pasquale Romano, stated that the company benefits from the growing adoption of EVs, which fuels charging demand. However, Romano acknowledged that supply constraints remained a drag.
Romano expects the company’s revenue growth to accelerate due to the rapid adoption of EVs. Romano stated, “We see a steeper revenue trajectory than previously forecast that we expect will continue for the foreseeable future.”
ChargePoint now expects FY23 revenues to be in the range of $450 million to $500 million. The midpoint represents year-over-year growth of 96% (up from 65% growth achieved in FY22).
Jefferies analyst David Kelley expects supply-chain problems to continue. However, the analyst expects ChargePoint to achieve its gross margin forecast (22-26%) for FY23. Kelly is bullish about CHPT stock, and his price target of $28 implies 91.5% upside potential.
The analyst added that CHPT’s extensive channel relationships and dominant market share position it well to deliver strong growth. Along with Kelly, most analysts have a bullish outlook on CHPT shares. It has received nine Buy and three Hold recommendations for a Strong Buy consensus rating. Further, the average ChargePoint price target of $24.82 implies 69.8% upside potential from current levels.
While ongoing supply constraints could remain a short-term drag, favorable government policies and the growing adoption of EVs will accelerate the need for charging infrastructure, supporting growth at ChargePoint and EVGO. Further, product innovation and continued investments in infrastructure bode well for growth.
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