Provisions In U.S. Infrastructure Bill Could Suggest That ChargePoint is Ahead of Itself
Shares of ChargePoint Holdings, Inc. (NYSE: CHPT), a leading maker of electric vehicle (EV) charging stations, have rallied more than 40% since early October, first on the anticipation of a US$1+ trillion infrastructure bill passing out of the U.S. Congress and then on its actual passage on November 5. The legislation includes US$7.5 billion in federal grants to build a national network of charging stations.
ChargePoint’s move, which boosted its stock market capitalization by about US$2.5 billion, may not be fully merited given some of the details of the legislation. (No one generally wants to see how the meatloaf gets made.) A few details of the EV provisions in the infrastructure bill are as follows:
The US$7.5 billion in federal grants is about half of the US$15 billion that President Biden cited during his campaign as the amount necessary to build 500,000 charging stations across the U.S. According to the International Council on Clean Transportation, the U.S. would require about 2.4 million stations by 2030 if about 36% of new car sales were electric. In 2020, just 216,000 stations were in place. (Edmunds.com estimates that in the first six months of 2021, only 2.2% of vehicle sales in the U.S. were electric.)
DC fast charge ports, which can charge a vehicle to around 80% of its capacity, cost about US$40,000 – US$100,000. More conventional 240-volt chargers have a price tag in the US$2,000 vicinity, but those chargers can take eight hours to charge a car. ChargePoint has more than 118,000 charging points in North America and Europe, including 3,700 DC fast charge ports.
The US$7.5 billion in grants will be passed out fairly slowly. About US$5 billion of it will be doled out in approximate US$1 billion annual amounts over the next five years. Allocations to each state will generally be made based on state-by-state population. The remaining US$2.5 billion is a competitive grant program to be passed out by the federal government over five years based on “strategic needs.” It may take a year for the first portion of this money to be distributed.
On September 1, ChargePoint reported 2Q FY22 (quarter ended July 31, 2021) revenues of US$56.1 million versus US$40.5 million in the year-ago period. In turn, the company raised its full year FY22 guidance (year ending January 2022) to US$225 – US$235 million from its previous US$195 – US$205 million outlook.
With its recent rally, ChargePoint’s enterprise value is approximately US$7.7 billion. This implies the ratio of its enterprise value-to-calendar 2021 revenue is in the vicinity of 33x, an extraordinarily high figure and a valuation which may not be sustainable regardless of the company’s growth prospects.
| (in thousands of US dollars, except for shares outstanding) | 2Q FY22 | 1Q FY22 | 4Q FY21 | 2Q FY21 | 1Q FY21 |
| Revenue | $56,121 | $40,510 | $42,391 | $34,957 | $32,776 |
| 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) |
| Cash | $618,089 | $609,809 | $145,491 | N/A | N/A |
| Debt – Period End | $21,582 | $22,866 | $57,353 | N/A | N/A |
| Shares Outstanding (Millions) | 322.0 | 305.1 | N/A | N/A | N/A |
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 in the April 2021 quarter.
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. The company is expected to report 3Q FY22 results in late November or early December.
ChargePoint is a product of a SPAC merger with SPAC sponsor Switchback Energy. The merger closed in late February 2021.
ChargePoint stock has benefitted from the market’s recent re-embrace of the EV industry and has paid little attention to the valuations accorded to many EV-related stocks. It is of course possible that this trend continues.
Passage of the U.S. infrastructure is clearly a positive for ChargePoint and the overall EV industry. However, the money will be distributed at perhaps a slower pace than investors appreciate. This could suggest that ChargePoint stock, after a sharp upward move, may be ahead of itself.
ChargePoint Holdings, Inc. last traded at US$26.90 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.
