Project: Charging ahead - ChargePoint (CHPT)

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Mosby, K. (2022). Charging ahead - ChargePoint (CHPT). LDbase. http://ldbase.org/projects/acab23be-2ba3-4a3c-b8ad-e3ec08640852

ChargePoint Holdings (CHPT)

What has been propelling electric vehicles forward and what will power them into the mainstream across the world? It is a combination of growing political concern over climate change, the need to get air pollution under control in big cities with urban congestion, and breakthroughs in electric vehicle batteries that lower costs and expand range.

In the United States and around the world, governments support EV sales in different ways, from simple lump sum grants and subsidies to tax breaks to more complex formulas that vary with the type of vehicle or the incomes of buyers.

The infrastructure for electric-vehicle charging continues to expand. In 2019, there were about 7.3 million chargers worldwide, of which about 6.5 million were private, light-duty vehicle slow chargers in homes, apartment buildings and workplaces. Convenience, cost-effectiveness and a variety of support policies (such as preferential rates, equipment purchase incentives, and rebates) are the main drivers for the prevalence of private charging.

An indirect but powerful way to play the electric vehicle (EV) revolution is through companies providing battery-charging ports and stations. Many analysts point to the lack of charging ports as perhaps the most important impediment to the growth of EV adoption.

With more than 112,000 charging points in North America and Europe, ChargePoint is one of the biggest EV charging companies in the world. The company claims to control 70% of the public charging market share in North America. This lead is a huge advantage because of network effects as the company already has partnerships with roughly 75% of the Fortune 50 companies.

ChargePoint also has teamed up with auto makers like BMW so that their charging locations are seamlessly integrated into in-car navigation systems plus the company has a widely downloaded app which allows EV drivers to easily locate ChargePoint charging stations.

It’s worth highlighting that between 2010 and 2020, the U.S. installed a daily average of 30 charging ports. Considering the outlook for EV adoption, the country needs to install 380 charging ports on a daily basis over the next decade.

The electric-vehicle charging station market is expected to be worth $103 billion by 2028 and this translates into a compound annual growth rate (CAGR) of 26.4%.

ChargePoint’s cloud subscription platform and software-based charging hardware include options for home and multifamily to workplace, parking, retail and transport fleets. One ChargePoint account provides access to hundreds-of-thousands of places to charge in North America and Europe. So far, more than 92 million charging sessions have been delivered, with drivers plugging into the ChargePoint network every two seconds.

ChargePoint went public through a SPAC and the stock traded at 42 in early and is now trading at 15.

In short, the stock got way ahead of itself in terms of valuation as EV mania in the market overtook common sense. The stock does appear to have some support around the 14-15 price point but it is a speculative idea in that it has a ways to go before becoming profitable.

Over the two-year period from their 2020 to 2022 fiscal years, the company did grow their sales of charging systems by about 70% and their subscription revenue by about 85%. Looking ahead, ChargePoint projects that it will reach 425,060 and $2.1 billion in revenue by 2026.

I believe the market may be undervaluing ChargePoint’s strong growth outlook so aggressive investors can begin accumulated at its current levels.

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