Is ChargePoint Stock a Buy?

Currently, the rapid consumer adoption of electric vehicles (EVs) and the expansion of manufacturers’ model lineups has led to increased interest in electric vehicle (EV) inventories. In fact, the IEA estimates that by 2030, nearly 60% of new cars sold worldwide will be EVs.

Not surprisingly, the rise in electric vehicle sales has created a lot of demand for EV charging stations in the United States and abroad. chargepoint holdings (CHPT -3.93%).

I’m a little skeptical that the company is a good investment so far, but let’s take a closer look at what’s happening with ChargePoint.

Image Source: Getty Images.

Current Status of ChargePoint

ChargePoint sells hardware and software for charging stations. The company has many companies as customers and pays to install charging stations for their customers and employees.

Individuals can also pay for a subscription service to use ChargePoint’s charging network. What also sets ChargePoint’s business model apart from some competitors who typically don’t offer both is the combination of hardware and software they sell.

The company has the largest EV charging network in the U.S. In the third quarter (ending Oct. 31), ChargePoint had over 210,000 charging ports across the U.S. and Europe, up 30% from the same period last year. Did.

Additionally, ChargePoint revenue increased 93% in the quarter to $125.3 million. In the first nine months of 2022, sales increased his 95% to $315.3 million.

And finally, the Investments and Jobs Act passed last year (including $5 billion in EV charging infrastructure) could help the company continue to expand its fast-charging DC stations in the US, but It is not yet known how much impact it will have on ChargePoint’s business.

Problems with ChargePoint

While all of the above is good news for ChargePoint and reason to be optimistic about the company, there are some real concerns investors should be aware of.

First, it’s worth mentioning that while the EV industry is currently in the midst of significant growth, EV stocks are not doing very well. Companies in this space are risky investments and ChargePoint’s 53% drop over the past 12 months is a testament to the industry’s volatility.

More importantly, ChargePoint is currently unprofitable and things are not going in the right direction.

ChargePoint’s net loss in the third quarter widened to $84.5 million from a loss of $69.4 million in the same period last year, while the company’s revenue nearly doubled during that time.

The underlying problem with ChargePoint right now is the fact that gross margins are a bit volatile.its gross margin Under Generally Accepted Accounting Principles (GAAP) It improved 1% to 18% in the third quarter, down significantly from 25% in the same period last year.

Management said the decline in margins was primarily due to “supply chain disruptions that have impacted both costs and availability, as well as increased new product introduction and transition costs.”

Many of the young companies are unprofitable, and some of them end up being good long-term investments, but ChargePoint’s declining profit margins could be a red flag for investors.

ChargePoint stock is not a buy

Will ChargePoint’s margins turn around? Sure. But for now, the company’s growing losses should deter investors. The EV industry is still struggling with rising costs, inflationary pressures and supply chain problems, and it is still unclear how long these problems will last.

Given the current margin issues and high risk in the electric vehicle industry, I don’t think ChargePoint’s stock is a buy. The company certainly has the potential to turn things around in the future, but I think there’s too much uncertainty in ChargePoint’s stock price.

Chris Niger has no positions in any of the stocks mentioned. The Motley Fool has no positions in any of the companies mentioned. The Motley Fool’s U.S. headquarters has a disclosure policy.

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