ChargePoint’s Struggle: Can This EV Charging Company Bounce Back?

ChargePoint (NYSE: CHPT) has yet to create millionaires since its debut in the stock market. The electric vehicle (EV) charging station provider went public through a merger with a special purpose acquisition company (SPAC) on March 1, 2021. At that time, its stock opened at $32.30, giving it an enterprise value of almost $9 billion.

However, ChargePoint’s stock now trades for just over $1 per share, resulting in an enterprise value of about $550 million. This marks a decline of more than 90% in its value, stemming from stagnant growth, increased competition, and escalating losses. Rising interest rates have further diminished its once lofty valuations.

Will this underperforming green energy stock manage to recover in the coming years and create significant gains for investors? Or is its future destined for further decline?

Image source: Getty Images.

What Caused ChargePoint’s Stock To Decline?

ChargePoint manufactures EV charging stations for homes, businesses, and companies operating electric vehicle fleets. It managed 315,000 charging ports in North America and Europe during its latest quarter. Additionally, its global roaming partnerships provide drivers access to 1.1 million charging points.

Founded 17 years ago, ChargePoint initially held a strong position in the EV charging industry. Today, however, it faces stiff competition, particularly from Tesla‘s (NASDAQ: TSLA) expanding network of Level 3 Superchargers. These are faster than ChargePoint’s Level 1 and Level 2 chargers and are increasingly compatible with third-party EVs. Although ChargePoint has been working on more Level 3 stations, most of its existing stations still use the slower chargers.

ChargePoint has to increase its production of faster chargers, broaden its network, attract more drivers to its higher-margin subscriptions, and reduce its losses. Despite these efforts, the company’s revenue growth has stagnated over the past three and a half years, and it continues to operate at a significant loss.

Data source: ChargePoint. YOY = Year-over-year. Fiscal year ends in January of the calendar year.

The slowdown can largely be attributed to rising interest rates, which have hindered commercial customers from installing new charging stations, as well as a cooling EV market and strong competition from Tesla and faster-growing rivals like EVgo (NASDAQ: EVGO).

Is Recovery Possible for ChargePoint?

For fiscal 2025 (ending January 2025), analysts predict that ChargePoint’s revenue will decline by 13% to $439 million, while narrowing its net loss to $258 million. The forecast for fiscal 2026 is more promising, with expected revenue growth of 28% to $562 million and a smaller net loss of $163 million. This outlook indicates that ChargePoint may rebound as interest rates decrease and the EV market expands. During its latest conference call, the company suggested that business might stabilize in the latter half of fiscal 2025 as these broader economic factors come into play, inventory challenges are resolved, and manufacturing in Asia improves.

However, there are three key reasons to question this optimistic perspective. First, while it aims to narrow net losses, the company is doing so by downsizing and laying off staff, indicating an overall contraction when expansion is necessary. Such self-imposed limits will likely prevent it from achieving economies of scale and reducing operational expenses.

Second, ChargePoint’s financial health appears tenuous. As of the second quarter of fiscal 2025, it reported only $243 million in cash and equivalents. Its high debt-to-equity ratio of 3.3 further complicates its ability to secure fresh funding at viable rates. Finally, the company’s share count has reportedly increased by 55% since going public due to secondary offerings and stock-based compensation. Insider selling has also been prevalent over the past year, sparking concerns about stock dilution and insider confidence that could hinder short-term progress.

Should Investors Bet on ChargePoint for Big Gains?

With an enterprise value of $550 million, ChargePoint is trading at a low 1.3 times this year’s sales. In comparison, EVgo is valued at 2 times this year’s sales, yet it is expected to see revenue growth of 60% in 2024 and 39% in 2025 as it develops its smaller charging network.

While ChargePoint’s stock may seem undervalued, the intense competition from Tesla, EVgo, and other firms could prevent it from making significant gains in the near future. Therefore, it is more likely to cause further challenges rather than generate wealth for its contrarian investors.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.