ChargePoint Shares – Down 95% From Highs, and Up 40% in 1 Month, Is It Time To Buy?

ChargePoint (NYSE: CHPT) shareholders have been on quite the journey over these past few years, with 40%+ gains over the past month doing little for the P/L of longer term holders. The company which emerged as a player in the electric vehicle (EV) infrastructure sector, focusing on the operation of EV charging locations has dropped hard in recent times, sitting 77.02% in the red over the last 12 months, even with the recent welcome shift taken into account.

Despite the integral role the company plays in the EV transition, its business performance has not quite matched the optimistic expectations that once surrounded this sector, and the shift in growth sectors getting the headlines has not helped, with the share price now more than 95% down from the lofty highs of 2020.

The recent uptick in sentiment over the last month has primarily been driven by speculation that Tesla is scaling back its workforce dedicated to its own network of chargers, leading to conjecture that there may be more room for ChargePoint to extend its market presence. In light of the intensifying competition in the EV charging space, such assumptions have spurred interest in those who have been waiting for a catalyst in CHPT.

In order to expand its' operational capacity, ChargePoint has encountered significant growth-oriented expenses, which directly impact its profitability. These costs stem from research and development, sales and marketing, and general administrative functions necessary to establish and sustain its charging network operations. Such high operating costs are common in expanding companies within emerging industries, but they do pose a considerable risk to profitability and long-term viability, especially as interest rates are higher than in previous years.

Furthermore, examining ChargePoint's recent fiscal performance reveals pressing challenges. For the fiscal year 2024, the company reported $506 million in revenue, which might appear promising at first glance. However, after accounting for the cost of revenue, which amounted to $476.5 million, and operating expenses at $480 million, ChargePoint ended up with a significant full-year loss of $1.22 per share. This financial outcome highlights the company's ongoing struggle to turn revenue into profit, given the large-scale investments required to grow its charging network.

While ChargePoint holds a meaningful position within the burgeoning EV industry and it may benefit from the broader shift towards electric mobility, potential investors should carefully weigh the realistic challenges it faces.

Analysts price targets for CHPT remain fairly healthy, with the consensus mark of $3.38 more than 75% above the most recent close. With the next earnings scheduled for June 5th, there could be some revisions coming depending on how well the company has executed through the period. With these targets being dynamic in nature, you are always best considering them within the broader framework of fundamentals.

High ongoing expenses, considerable losses, and a volatile stock price are important factors that suggest a cautious approach may be warranted. The sector is one that hinges very heavily on sentiment, both from investors and analysts, and with the current shift of en vogue growth sectors having shifted from EV to AI, there may be some wait for CHPT to deliver on it's early promise.