ChargePoint is a Buy, says Roth Capital

Strong demand for its products and services propelled EV charging company ChargePoint (ChargePoint Stock Quote, Charts, News, Analysts, Financials NYSE:CHPT) to record revenue in its latest quarter. But the stock is still mired in a multi-year slump. 

What’s an investor to do? Buy it, says Roth Capital Partners analyst Craig Irwin, who delivered an update to clients on Friday, saying growth prospects for ChargePoint are looking good for the new year.

ChargePoint, which has an electric vehicle charging network in North America and Europe, released on Thursday its fiscal third quarter 2023 financials for the period ended October 31, 2022. The company posted revenue up 93 per cent year-over-year to $125.3 million, including subscription revenue up 62 per cent to $21.7 million. Gross margin came in at 18 per cent, down from 25 per cent a year earlier, with the company chalking up the drop to supply chain disruptions affecting cost and supply availability as well as new product introduction and transition costs. (All figures in US dollars.)

“ChargePoint delivered another quarter of growth exceeding 90 per cent year-over-year, as we continue to scale the business to meet strong demand for our solutions across North America and Europe,” said Pasquale Romano, President and CEO, in a press release. “Our networked, asset-light business model continues to enable our growth as we strive to deliver improved margins and operating leverage.”

Irwin said demand remains impressive for ChargePoint, pointing to an increase in its Fleet business, which now accounts for 18 per cent of total revenue compared to 14 per cent two quarters ago. Comparing numbers, ChargePoint’s $125.3 million topline was even with Irwin’s forecast at $125.0 million but under the consensus estimate at $132 million, while adjusted EBITDA at negative $51.5 million was a greater loss than Irwin expected at negative $42.2 million but better than the Street’s forecast at negative $54.9 million.

“ChargePoint should see an accommodative market for similar robust growth through FY24 benefitting from federal and other subsidies, while management remains cautiously optimistic. Margin execution likely materializes as the key driver for stock performance,” Irwin wrote.

Looking ahead, Irwin is expecting full fiscal 2023 revenue and EBITDA of $479.6 million and negative $225.7 million, respectively.

With the update, Irwin has retained a “Buy” rating on ChargePoint and a $46.00 target price, which at the time of publication represented a projected one-year return of 277 per cent.

“We maintain our $46 target using a 37x multiple on FY27E (Jan) EBITDA of $415 million. We believe the 37x multiple is appropriate for ChargePoint’s leadership position in EV charging,” he said.