Shares of ChargePoint Holdings (NYSE:CHPT) stock could use some juice. The stock of the company that makes electric vehicle charging stations is down nearly 40% this year, bringing its losses over the past six months to 55%.
At $11.8 per share, CHPT stock is now 77% below its all-time high of $46.10 reached in December 2020. Given the continued decline in its share price, it’s fair to ask what it will take to get ChargePoint turned around and moving higher?
Potential Market
ChargePoint has a potentially huge market opportunity in front of it. According to the International Energy Agency (IEA), electric vehicle sales totaled 6.6 million units in 2021, accounting for 9% of all vehicles sold globally last year.
That was up 200% from 2.2 million EVs sold in 2019 before the pandemic, which then accounted for only 2.5% of worldwide automotive sales. And electric vehicle sales are forecast to rise more than 300% and reach 26.8 million units by 2030, according to S&P Global Analytics.
| CHPT | ChargePoint | $11.80 |
As EV sales increase, demand for the infrastructure needed to support those electric vehicles is also going to rise. And that’s where ChargePoint comes in.
The Campbell, California-based company currently operates the largest network of electric vehicle charging stations in the world, spanning 14 countries and counting. In the U.S., ChargePoint recently announced that it opened its 30,000th charging spot at a shopping mall in Chattanooga, Tennessee.
The company brags that there are now more ChargePoint EV charging stations in America than Starbucks coffee shops. And more charging stations will be needed as electric vehicles eventually surpass gas-powered cars, trucks and SUVs to become the norm. EV charging stations will need to become as common and ubiquitous as gas stations in order to support the number of electric vehicles on U.S. roads and highways.
Government Support
The administration of President Joe Biden continues to aggressively support the transition to electric vehicles and the related infrastructure that’s needed. On May 2, the White House announced that it is dedicating $3 billion in infrastructure funding to finance electric vehicle manufacturing in the U.S. That commitment will be funded by the U.S. Department of Energy from the $1 trillion infrastructure bill that the president signed into law last year. President Biden has said that he wants half of all vehicles sold in the U.S. to run on electricity by 2030.
In addition to helping the environment, President Biden says developing a strong domestic electric vehicle market will help the U.S. compete against technology rivals such as China and enhance America’s energy independence.
Much of the funding for the electric vehicle sector is being allocated to the buildout of EV chargers, which is good news for ChargePoint. Electric vehicles are also becoming a more attractive option for consumers with oil and gas prices marching higher, though they continue to cost more to purchase than conventional gasoline-powered vehicles.
While ChargePoint continues to grow at a brisk clip, the company remains unprofitable. In its most recent earnings, the company reported a loss per share of -$0.17, which was worse than the -$0.16 per share loss expected by analysts. Revenues came in ahead of Wall Street forecasts at $80.68 million versus $76.13 million that was expected. While the company remains unprofitable, its stock is likely to stay depressed.
Hold Off On CHPT Stock
ChargePoint is doing a lot of things right and is well-positioned to capitalize on the electric vehicle boom. Plus, the company has the backing of the federal government in Washington, D.C. and governments at the state level.
That said, the EV sector is still emerging and developing. It will take many more years, possibly decades, before electric vehicles supplant gasoline-powered automobiles.
We’re in the early innings of the electric vehicle revolution. As such, it will take a while before ChargePoint stock is able to recover and meet its potential. The share price is also likely to be held back until the company turns a profit.
For these reasons, it would be best for investors to hold off on taking a position in ChargePoint. For the time being, CHPT stock is not a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.