ChargePoint Struggles Amid Shift in Electric Vehicle Market

ChargePoint (NYSE: CHPT) has experienced a challenging path since going public in 2021. Initially, the company thrived on enthusiasm for the electric vehicle (EV) movement, which saw automakers pivoting towards EVs and driving demand for charging infrastructure.

However, the current environment has shifted dramatically. Automakers are retracting their ambitious EV plans, while the political climate is less conducive to supporting EV development and infrastructure. These changes have significantly impacted ChargePoint’s stock price, which has fallen to a concerning low.

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ChargePoint now appears to be a value proposition at its current price, trading at just 0.6 times its sales. Yet, investors should weigh what’s causing these shifts before deciding if this low entry point represents a unique opportunity or signals a deeper issue.

ChargePoint’s Position in the Charging Network Landscape

ChargePoint operates one of the largest EV charging networks globally, with stations across the United States and Europe. According to data from EVAdoption, ChargePoint maintains 15,454 locations with 48,946 charging ports, compared to Tesla, its primary competitor, which has 5,872 locations and 12,412 ports.

As EV sales rise, one would expect charger operators to benefit. In 2023, a record 1.3 million EVs were sold in the U.S., marking a 64% increase from 2022 sales. In the fourth quarter, EVs represented 8.7% of new vehicle sales, up from 7.3% in the first quarter of 2023.

EV adoption continues to trend upward due to various factors, including government incentives, rebates, tax credits, and increased automaker investment in EV production.

Challenges Facing ChargePoint

Despite favorable trends in the EV market, ChargePoint must navigate several hurdles. Rising interest rates have impacted lending activity, introducing uncertainty that led consumers and businesses to reduce spending. Consequently, EV adoption has been slower than anticipated, which ChargePoint’s management noted has hindered the growth of its charging infrastructure. For the year, ChargePoint reported total revenue of $417 million, a 17.5% decrease from the previous year.

The company also faces intensifying competition from Tesla, which boasts 12,580 fast-charging ports across 1,246 locations, compared to ChargePoint’s 1,675 fast-charging ports at 1,147 locations.

Image source: Getty Images.

Looking forward, the outlook for EVs is less promising than in recent years. The Trump administration is attempting to retract project funding and reduce emphasis on renewables and associated infrastructure.

On February 7, the Trump administration instructed states to suspend the $5 billion National Electric Vehicle Infrastructure (NEVI) program, which was initiated under the 2021 Infrastructure Investment and Jobs Act to enhance EV charging availability nationwide. This funding freeze is expected to face legal challenges but introduces additional uncertainty for ChargePoint’s operations.

Evaluating ChargePoint as an Investment

Moving forward, ChargePoint is confronted with substantial challenges. With the Republican-led executive branch and Congress, EVs will likely not receive the same level of support as under the previous administration.

ChargePoint’s burn rate also raises concerns. Last year, the company posted a gross profit of $100.6 million, against significant operational expenses, which resulted in a $253 million loss from operations. Although this marked an improvement from the $450 million loss reported in 2022, the company needs to focus on cost-cutting and growth in a demanding environment.

Currently, ChargePoint holds approximately $225 million in cash. Given its burn rate, it may need to access capital markets for additional funds, a route it has frequently taken since going public. Since mid-2021, diluted shares have surged by 43% to reach 448 million, resulting in substantial shareholder dilution.

ChargePoint has considerable work ahead to reduce expenses and enhance its financial performance. Additionally, revenue growth is showing signs of deceleration. Considering these factors, prospective investors should approach the stock with caution until the company demonstrates tangible improvement.

Should You Invest $1,000 in ChargePoint Now?

Before making any decisions on ChargePoint’s stock, consider the following:

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Courtney Carlsen holds no position in any 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.