ChargePoint delivered another quarter of growth exceeding 90% year-over-year, as we continue to scale the business to meet strong demand for our solutions across North America and Europe,
Our networked, asset-light business model continues to enable our growth as we strive to deliver improved margins and operating leverage.
- Pasquale Romano, President and CEO of ChargePoint Holdings (CHPT)
ChargePoint Holdings Inc (NYSE: CHPT), a leading electric vehicle (EV) charging network, powers all kinds of electric vehicles, from passenger cars to delivery vans and buses. This means an investment in ChargePoint can act as an assessment of sentiment for the EV industry. The company just released its Q3 earnings. Let's see if this is a worthwhile investment.
What Is ChargePoint?
ChargePoint is creating a new fueling network to move people and goods on electricity. The company, through its subsidiaries, provides electric vehicle charging solutions that enable the electrification of mobility for all people and goods. ChargePoint Holdings serves customers in North America and Europe.
Since 2007, ChargePoint has been committed to making it easy for businesses and drivers to go electric with one of the largest EV charging networks and a comprehensive portfolio of charging solutions available today.
ChargePoint's roaming reach is now over 355,000 ports in North America and Europe. And the company now counts 80% of the 2021 Fortune 50 as customers and 53% of the 2021 Fortune 500 as customers.
These customers, such as Volvo and Starbucks, rely on ChargePoint for upfront consultation, planning, build-out and ultimately, continued infrastructure optimization.
The ChargePoint cloud subscription platform and software-defined charging hardware are designed to include options for every charging scenario, from home and multifamily to the workplace, parking, hospitality, retail and transport fleets of all types.
Today, one ChargePoint account provides access to hundreds of thousands of places to charge in North America and Europe. More than 133 million charging sessions have been delivered to date, with drivers plugging into the ChargePoint network on average every second.
ChargePoint went public via a business combination with Switchback Energy Acquisition Corporation (a publicly traded special purpose acquisition company - SPAC).
How Does ChargePoint Make Money?
ChargePoint makes money selling networked charging systems and software subscriptions.
ChargePoint reported its Q3 earnings results on December 6 and returned another record quarter. The company met the lower end of its guidance target with $125m in revenue. This is up 93% Y/Y and 16% Q/Q. Production constraints led to this shortfall, missing expectations.
Revenue: $125.3m (up 93% Y/Y)
Networked Charging Systems Revenue: $97.6m (up 105% Y/Y)
Subscription Revenue: $21.7m (up 62% Y/Y)
GAAP Gross Margin: 18% (down from 25% Y/Y due to supply chain disruptions
Non-GAAP Gross Margin: 20% (down from 27% Y/Y)
GAAP Net Loss: $84.5m (increased from $69.4m Y/Y)
Non-GAAP Pre-Tax Net Loss: $56.4m (increased from $47.3m Y/Y)
Cash And Short-Term Investments: $397.6m
Shares Outstanding: 342 million shares of common stock outstanding.
CHPT Q4 Guidance
For Q4, ChargePoint hopes to improve its operating leverage and, as such, guides for revenue of $160m to $170m. The company also raised its full-year revenue guidance above $5m.
Revenue: $160m to $170m
A sequential Non-GAAP gross margin improvement from the third quarter's 20%, resulting in an annual gross margin below previous guidance.
Full Year Guidance
Revenue: $475m to $485m
Non-GAAP operating expenses of $325m to $335m. At the midpoint, this represents an anticipated decrease of $30m compared to previous guidance.
CHPT Q2 Financial Results
ChargePoint reported its latest quarterly results on August 30 for the period ending July 2022.
Earnings per share (EPS) beat FactSet analyst consensus estimates by 14.4% coming in at -$0.19 instead of the projected -$0.22. Meanwhile, sales of $108.29m beat guidance of $96m to $106m, beating consensus estimates.
Total Revenues: $108.29m (up 93% Y/Y)
Networked Charging Systems Revenue: $84.1m (up 106% Y/Y)
Subscription Revenue: $20.2m (up 68% Y/Y)
GAAP Gross Margin: 17% (down from 19% Y/Y)
Non-GAAP Gross Margin: 19% (down from 23% Y/Y)
GAAP Net Loss: $92.7m (up 9% Y/Y)
Non-GAAP pre-tax net loss: $62.3m (up 54.5% Y/Y)
The GAAP gross margin was down Y/Y primarily due to supply chain disruptions, which affected both cost and supply availability and increased new product introduction and transition costs.
Plus, the subscription gross margin fell, which was put down to call center costs which the company includes in its subscription line. This also includes ChargePoint's Assure warranty products.
In Q2, ChargePoint's installed base of network ports grew to approximately 200,000. That's a 70% Y/Y increase. It includes 60,000 in Europe, and over 15,000 are DC fast.
Recent supply constraints translated into a higher backlog of orders. In Q2, this backlog grew 26% Q/Q.
CHPT Stock Financial Metrics
CHPT stock has a price-to-book-value (P/BV) of 9.4, which is well above the industry average of 1.5. CHPT stock does not come with a shareholder dividend (what is a dividend?).
Over the past year, ChargePoint Holdings Inc (CHPT) has traded between $8.50 and $22.18. Today the CHPT share price is approximately $10.89. Year-to-date, ChargePoint Holdings stock is down by -45%, while the S&P 500 is down -17.8% over the same timeframe.
ChargePoint Stock Forecast - Analyst Ratings
20 FactSet analysts have a consensus Overweight rating on CHPT stock. The consensus ChargePoint stock forecast from these analysts is a target share price of $21.03.
ChargePoint Growth Potential
EVs are becoming increasingly popular due to their lower operating costs, reduced emissions, and improved performance compared to traditional fossil-fueled vehicles. They are also a key part of efforts to reduce dependence on fossil fuels and transition to a more sustainable transportation system.
Before going public via SPAC in March 2021, ChargePoint spent 14 years heavily investing in R&D and sales. Now it's looking more closely at ways to scale the business and how to invest in that process.
Along with its commercial chargers, demand for home chargers for single-family residences is also growing. Indeed, ChargePoint notes billings for residential were up over 125% Y/Y and up 11% Q/Q. The company states growth would have been significantly higher if not for supply chain constraints.
ChargePoint's deferred revenue, which is future recurring subscription revenue from existing customer commitments and payments, continues to grow. It finished Q3 at $175m, up from Q2 at $168m, which was up from $157m in Q1.
When asked about the National Electric Vehicle Infrastructure (NEVI) funds that may bring income to the business in the future, CEO Pasquale Romano replied:
we'll treat it completely as upside and we'll be very conservative with respect to how we plan for that going into next year because life always has more imagination than we all do.
Q2 showed signs that the commercial segment is beginning to recover, but Q3 was more muted.
CHPT Stock Risks
Stock-based compensation costs are high. In Q2, it cost ChargePoint $26.4m, a 70% rise from Q1. This fell to $25.7m in Q3. The company expects it will continue at this level until Q1 next year. This is the main reason the non-GAAP gross margin fell and is something shareholders should be aware of, as it could weigh on the CHPT stock price going forward.
ChargePoint is not profitable and is unlikely to be anytime soon. Therefore, it relies on debt and share dilution to raise the capital needed to grow. This is not good for CHPT shareholders.
The company continues to face supply chain disruption.
Inflation and rising interest rates are also headwinds for this stock.
Is CHPT Stock a Good Investment?
ChargePoint stock is a speculative investment, and its negative returns and financial metrics suggest it is overvalued.
The company is making sales and could become a key player in the EV transition, but that doesn't mean it's necessarily a good investment in the current economic environment.
The global macro environment faces multiple headwinds, from an energy and food crisis to rate hikes and a potential recession. Despite these challenges, climate change is driving the move to EVs, which is unlikely to change. Indeed, the big picture for EV demand still very much exceeds supply. Therefore, governments may push to accelerate the transition process.
However, geopolitical unrest and inflation could hamper supply chains for some time, affecting ChargePoint's ability to keep on top of deliveries. The company is also facing rising costs with inflation and the need to keep recruiting.
There are plenty of risks to consider, and the CHPT share price will likely face continued volatility in the coming year.
Whether you should invest in CHPT stock depends on your appetite for risk and belief in the company's growth.
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Updated: December 7, 2022