Down 42% year-to-date, ChargePoint (NYSE:CHPT) stock does not look worthy of investor’s money.
The largest manufacturer of electric vehicle charging stations in the world looks good on paper, but so far its potential has not translated into success for shareholders.
ChargePoint went public earlier this year at the height of the frenzy over special purpose acquisition companies (SPACs).
However, like many SPAC deals, CHPT stock has collapsed in the months since it made its market debut. Given the share price’s persistent weakness, shareholders might be best advised to cut their losses.
CHPT stock does seem to have gotten pulled down with the broader SPAC sector. After threats of greater regulation over the deals led Wall Street to cool on so-called “blank check” companies or “reverse mergers,” underlying fundamentals have also dragged down the company’s share price.
The company’s revenue for its fiscal 2021 year ended on Jan. 31 amounted to $146.5 million, only 1% higher than the $144.5 million in revenue it generated in the previous 2020 fiscal year.
Coming just months before it went public, the fiscal 2021 financial results led investors to sour on ChargePoint and its prospects, prompting a swift and deep sell-off.
While ChargePoint says it wants to sell its electric vehicle charging units to both commercial and retail customers, the reality is that the vast majority of its current revenue (75%) comes from commercial sales to businesses and office parks.
The general public remains slow to adopt electric vehicles with only about 2% of the vehicles on U.S. roads today being plug-in electric.
Electric vehicles are clearly the future of the automotive industry, but they have a long way to go to achieve mass adoption. Consumers continue to raise concerns ranging from slow charging times to limited driving range when it comes to electric cars, trucks and SUVs.
Lofty Goals and CHPT Stock
Despite its middling financial results and a slowing growing market, ChargePoint continues to have lofty goals and sets itself ambitious targets. Maybe too ambitious.
The company has set a target of achieving $1 billion in sales by 2025, a nearly 10 fold increase from its current sales in a little more than four years.
ChargePoint has also raised its full-year guidance for its current fiscal 2022 year to a range of $225 million to $235 million, which would represent 57% revenue growth over its previous fiscal year.
The second half of this year will need to be exceptionally strong for ChargePoint to reach its targets given that the company generated revenue of $97 million in the first six months of its current fiscal 2022 year.
The company did note in its most recent quarterly financial results that its residential segment saw sales grow by 79% on an annualized basis. This growth was powered by the increasing use of its charging stations at housing complexes across the U.S.
Hopefully, that growth will be sustained in the final months of this year, but it isn’t worth betting on.
Recent Acquisition
In August this year, ChargePoint announced that it is acquiring ViriCiti, a commercial fleet management provider. Acquiring ViriCiti will enable ChargePoint to sell its electric vehicle charging stations and related infrastructure to companies with major commercial fleets such as United Parcel Service (NYSE:UPS) and Waste Management (NYSE:WM).
It will also enable ChargePoint to go after lucrative government contracts as the shift to electric vehicles accelerates nationwide.
ChargePoint’s fleet segment is an area of strength for the company. In this year’s second quarter, the segment grew its sales by 187% year over year. The fleet segment has a lot of potential, but ChargePoint will have to demonstrate that it can grow that area of its business by winning competitive contracts and aligning itself with strategic partners.
ViriCiti is a step in the right direction as it will allow ChargePoint’s customers to monitor their operations data and gain valuable insights into their fleet’s performance.
Wait and See Where CHPT Goes
The electric vehicle market as a whole has cooled off this year with once high flying stocks such as Tesla (NASDAQ:TSLA) slumping. While electric vehicle companies and their stocks have a bright future, that future remains off in the distance.
ChargePoint’s time is coming but it is not here quite yet. As such, investors should wait to see where the company’s stock bottoms before taking a position.
In the current environment, and with electric vehicle adoption slow to catch on, CHPT stock is not a buy.
Disclosure: 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.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.