ChargePoint stock price has badly trailed its peer companies in the past 12 months. CHPT has plunged by more than 83% in this period while EVGO and Blink Charging have crashed by 59% and 68% in that period. Its market cap has dropped from over $11 billion in 2021 to $895 million, turning it into a penny stock.

EV charging industry woes

The EV charging industry ought to be doing very well now that millions of these vehicles are in American roads. Also, there is an ongoing scarcity of public charging networks in the country. It is estimated that there are over 150k charging stations in the US and S&P estimates that the country needs over 2 million charging stations by 2030

EV charger forecast

As a result, in theory, companies in the EV charging industry ought to be doing well as demand for their charging stations rise. Most importantly, the Biden administration has announced several initiatives to boost the EV charging infrastructure. In January, the government announced that it will provide $148 million to repair or replace 4.5k public charging infrastructure.

However, ChargePoint and other companies in the industry have found out that the industry is hard to crack than expected. For one, it is common for charging stations to break down, leading to higher maintenance costs. Also, the cost of depreciation is usually higher than in gas stations. 

As a result, the most recent ChargePoint results showed that the company’s revenue was not growing and that its gross margin had turned negative. Its revenue crashed by 12% YoY to $110 million. That revenue was much lower than its guidance of between $150 million and $160 million. Further, its gross margins came in at minus 18% mostly because of its non-cash impairment charge.

A key challenge for ChargePoint’s investors is that dilution is a big risk. The company ended last quarter with $397 million in cash and equivalents. Most of these funds came from the $232 million it raised by selling its stock during the quarter. 

There is a high possibility that ChargePoint will raise more money this year since the company is losing over $100 million every quarter. Its net loss in the last quarter stood at over $158 million. It lost over $360 million in the previous four quarters.

It is unclear how ChargePoint will raise these funds, which explains why the management has issued a going concern warning. The most likely scenario is where the company raises these funds through a convertible bond. This is a type of loan that can be converted into a stock depending on the shares performance. 

The outlook for ChargePoint is quite uncertain as the EV industry slows. In my last articles, I have explained the risks that are facing EV companies like Tesla, Rivian, and Lucid. These companies are seeing slow revenue growth as they struggle to move from early-adoption to mass-adoption.

ChargePoint stock price forecast

Chargepoint stock

CHPT stock chart

Turning to the weekly chart, we see that the CHPT stock price bottomed at $1.67 as concerns about its future rose. It has struggled to move below this level several times. A closer look shows that this level resembles a double-bottom pattern. The shares remains below all moving averages, in a sign that bears are in control.

Therefore, at this point, I believe that shorting the stock is quite risky because it has already crashed hard in the past few months. Moreso, it has a high short interest, making it a good candidate for a short-squeeze. On the other hand, buying the stock is also risky because of its financial situation and the rising possibility of another capital raise. Therefore, I’d recommend staying in the sidelines.

By Crispus Kanyaru

With a keen eye for market trends and a knack for translating complex financial concepts into engaging narratives, Crispus has established himself as a trusted voice in the world of finance. His work has graced the pages of esteemed publications like Benzinga, Forbes, Invezz, and Banklesstimes, reaching a diverse audience eager to navigate the ever-evolving financial landscape. Crispus's journey began with a deep curiosity about the forces shaping the global economy. This natural inquisitiveness led them to pursue a degree in finance and CPIA, equipping them with a solid foundation in financial theory and analysis. But Crispus knew that knowledge alone wasn't enough. He craved to bridge the gap between dry data and real-world experiences, to make finance accessible and relatable to everyone.

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