ChargePoint Rallies After Posting Quarterly Revenue Beat; Stock’s Valuation Looks Rich

After the market close on September 1, ChargePoint Holdings, Inc. (NYSE: CHPT), a leading maker of electric vehicle charging stations, reported results for the quarter ended July 31, 2021 (2Q FY22) that were slightly better than expected. 

Most prominently, ChargePoint reported 2Q FY22 revenues of US$56.1 million versus US$40.5 million a year ago, and ahead of consensus analysts’ expectations of just over US$49 million. In turn, the company raised its full year FY22 (year ending January 2022) revenue guidance to US$225-US$235 million from its previous US$195-US$205 million outlook.

ChargePoint stock soared 13% in after-hours trading on this news to US$24.00. However, we caution investors that these gains could be short lived for two main reasons. 

First, ChargePoint shares had declined around 40% from late July through the regular market close on September 1. After a down move of that magnitude in such a condensed time frame, a piece of even slightly better-than-expected news can trigger a reflex rally.

Second and probably more important, ChargePoint’s enterprise value (EV) is approximately US$7.1 billion. This implies the ratio of its EV-to-its calendar 2021 revenue is in the vicinity of 30x, an extraordinarily high figure and valuation which may not be sustainable regardless of the company’s growth prospects.

(in thousands of US dollars, except for shares outstanding)2Q FY221Q FY224Q FY212Q FY211Q FY21
Operating Income($74,288)($46,598)($35,320)($23,530)($29,552)
Operating Cash Flow($23,232)($37,966)N/A($15,375)($34,694)
Debt – Period End$21,582$22,866$57,353N/AN/A
Shares Outstanding (Millions)322.0305.1N/AN/AN/A
Fiscal 2022 ends on January 31, 2022.

Despite the revenue improvement, ChargePoint seems unlikely to generate positive operating income or operating cash flow for some time. Indeed, the company’s operating loss expanded to US$74 million in 2Q FY22 from US$47 million and US$24 million in the April 2021 quarter and the year-ago quarter, respectively. Similarly, its 2Q FY22 operating cash flow shortfall was US$23 million versus a smaller US$15 million deficit in 2Q FY21. ChargePoint has been in business since 2007 but has yet to record a quarterly profit.)

ChargePoint is a product of a SPAC merger with SPAC sponsor Switchback Energy. The merger closed in late February 2021.

The company is the largest pure play electric vehicle charging stock in North America. It has more than 118,000 charging points in North America and Europe, including 3,700 DC fast charge ports that provide drivers with quick-turnaround charging. ChargePoint also offers various AC charging station options for property owners, businesses, municipalities, and multifamily residences.

It is of course possible that the July 2021 quarter marks an inflection point for ChargePoint and revenues will grow dramatically over the next few years, consistent with the projections it outlined at its September 2020 SPAC merger announcement.

ChargePoint reported improved 2Q FY22 revenue, but its valuation still seems quite extended. Very few companies trade at a 30x EV-to-revenue multiple. Investors may want to be cautious in establishing new positions.

 ChargePoint Holdings, Inc. last traded at US$21.23 on the NYSE.

Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply