Although considered a leading player in the electric vehicle (EV) charging infrastructure amid the growing popularity of EVs, ChargePoint Holdings (NYSE:CHPT) faces challenges. The stock has plummeted by 65% this year due to delayed compatibility with Tesla’s charging network, significant stock dilution and distant profitability prospects. Investors should exercise caution and consider these risks before making investment decisions.
Despite the decline in shares since January, CHPT stock did surge into earnings. However, the stock has resumed its decline, giving up much of the gains it saw heading into its earnings print yesterday.
ChargePoint revealed that its EV charging network exceeded one million quarterly active drivers, with over two million EV drivers utilizing its stations. With approximately three million total EVs in the U.S., ChargePoint’s popularity signals potential upside as it establishes a robust national presence.
So, is CHPT stock a buy or not? Let’s dive into what the company reported and what investors may want to make of this EV charging name.
CHPT Sinks After Q3 Earnings Results
ChargePoint Holdings crumbled over 20% after-hours Thursday after lowering its guidance and announcing a new CEO. The company said it now sees third-quarter revenue of $108 to $113 million, well below the $150 to $165 million it previously expected. Rick Wilmer has been appointed as ChargePoint’s new President and CEO, taking over from Pasquale Romano, who held the CEO position since 2011.
Wilmer acknowledged challenges in ChargePoint’s core markets, North America and Europe, during the late third quarter, leading to revenue falling below expectations. Overall macroeconomic conditions and delays in fleet and commercial vehicle deliveries impacted “deployments with government, auto dealership and workplace customers.”
ChargePoint shares were down 67% year-to-date before the announcement, coinciding with EV makers adopting Tesla’s North American Charging Standard (NACS). This decline will likely be larger at the end of trading on Friday.
Why Investors Are Worried About CHPT
ChargePoint’s brief rally in early November wasn’t driven by company-specific news but rather by the market’s short-lived return to “risk-on” mode after the Federal Reserve decided to hold interest rates steady. The surge was favorable for rate-sensitive speculative growth stocks like CHPT.
Despite forecasts suggesting narrowing losses in the next 24 months, challenges like intense competition and slowing EV demand could impede the expected progress. The anticipated mass adoption of EVs may take longer than initially predicted.
While future positive macro events could trigger rallies, it’s crucial to recognize the recent surge as a dead cat bounce — a short-lived recovery in a declining stock. Expect any future macro-driven rallies to follow the same pattern, providing temporary relief for investors but likely overshadowed by the stock’s continued decline due to worsening fundamentals.
Be Cautious
At these levels, value investors may be warranted in taking a hard look at the company’s core fundamentals and business model. If the EV charging space explodes as many think is possible, ChargePoint’s market share metrics and its total addressable market could lead to significant growth and profits down the line.
That said, further shareholder dilution seems inevitable for ChargePoint, and if EV demand continues to decline, convincing investors to buy new shares might become nearly impossible. A game-over moment for CHPT stock is plausible. Buying shares today is likely unprofitable, as more bad news will keep it on a downward trajectory.
On the date of publication, Chris MacDonald did not hold (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.