Analysing ChargePoint’s Stock An In-Depth Look at ChargePoint’s Stock Performance

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By Ronald Tech

Ever since the inception of ChargePoint Holdings Inc., the company has witnessed its fair share of market turbulence. With the ongoing challenges gripping the electric vehicle (EV) industry and charging infrastructure, ChargePoint’s stock (NYSE: CHPT) tumbled 75% in 2023, leaving many investors scrambling for answers.

As the electric charging infrastructure transforms rapidly, the stock continues to face the repercussions. The growing losses, dwindling funding opportunities, and the imminent shift to a new charging standard have cast a shadow of doubt over ChargePoint’s ability to recover.

Unveiling the Core Business of ChargePoint

Prior to dissecting ChargePoint’s financial standing, it is crucial to comprehend the company’s primary revenue stream. While the company does generate revenue from operating a network of charging stations, a significant portion is derived from charger sales.

According to ChargePoint’s recent 10-Q filing with the SEC, the majority of its revenue is attributed to the sale of Networked Charging Systems, Cloud Services, and extended parts and labor warranties. The revenue structure doesn’t account for ChargePoint as a Service (CPaaS), which yields recurring revenue. Notably, in the third quarter of 2023, $73.9 million out of $110.3 million in revenue was attributed to networked charging systems, with subscriptions accounting for just $30.6 million.

It’s clear that the company predominantly operates as a charger vendor, albeit at a loss. With negative gross margins of 11% for charger sales in the first nine months of 2023 and the recent disruption caused by the industry transition to the North American Charging Standard (NACS), ChargePoint’s market position faces substantial jeopardy.

The Rockiness in Charging Infrastructure

The most pressing challenge for ChargePoint in recent times has been the shift in U.S. charging infrastructure towards the NACS developed by Tesla (NASDAQ: TSLA). This transition presents a dual threat, introducing Tesla’s superchargers as a direct competitor, while further homogenizing ChargePoint’s market position.

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This transition poses an obstacle for ChargePoint to distinguish its charging network amidst a landscape where all players utilize the same plug and provide the same commodity, electricity, thereby exerting immense pressure on its revenue potential.

A Feeble Starting Point

Even if ChargePoint could overcome strategic challenges, mounting losses have stonewalled its path to profitability. With a lack of financial stability from its existing charger and service sales, ChargePoint finds itself in a vulnerable position, further exacerbated by the increasing commoditization of its market presence.

It’s evident that the company’s struggles are deeply entrenched in financial mires, as depicted by its unprofitable trajectory, as seen in the CHPT Revenue (TTM) chart that reveals a consistent downward trend.

ChargePoint’s Standing in the Stock Market

Despite the optimistic outlook on the future of EV charging, the current outlook for ChargePoint appears bleak. While the EV charging market holds promising potential, the fundamental challenge lies in its inherent nature of providing a commodity, electricity, through a standardized plug (NACS) to vehicles, without any substantial competitive advantage or customer lock-in. Given ChargePoint’s financial distress, there seems to be no indication of an imminent turnaround.

It’s imperative for investors to recognize that despite the burgeoning EV charging market, profitability isn’t a given, exemplifying why ChargePoint isn’t a viable investment option at present.

Motley Fool Stock Advisor has identified 10 potential stocks for investors, yet ChargePoint isn’t one of them, underscoring the challenges that lie ahead for the struggling company.

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