ChargePoint Holdings, Inc. (CHPT) operates electric vehicle charging networks and charging solutions internationally. CHPT went public through a reverse merger with blank check company Switchback Energy Corporation on March 1, 2021, becoming the world’s first publicly traded global electric vehicle (EV) charging network. However, the company has an ISS Governance QualityScore of 9, indicating high governance risk.

Shares of CHPT have surged 33.3% over the past month and 9.9% over the past five days. The recent rally comes after B. Riley analyst Christopher Souther rated the stock a “Buy.” He stated the company’s greater than 70% market share in North America.

Here is what could shape CHPT’s performance in the near term:

Bleak Financials

CHPT’s revenues increased 102% year-over-year to $81.60 million in the fiscal 2023 first quarter ended April 30, 2022. However, the company’s gross margin declined 800 basis points from the same period last year to 15%. Loss from operations widened 92.8% year-over-year to $89.83 million. Its EBT loss amounted to $91.13 million, compared to $82.29 million in earnings reported in the prior-year quarter. Furthermore, its net loss came in at $89.27 million, compared to the $82.29 million net profit reported in its fiscal 2022 first quarter. Loss per share worsened 67.5% year-over-year to $0.27.

Poor Earnings Growth Prospects

Analysts expect CHPT’s revenues to rise 84.7% year-over-year to $103.63 million in its fiscal 2023 second quarter, ending July. In addition, the consensus revenue estimate of $466.51 million for fiscal 2023 (ending Jan 2023) indicates a 92.5% improvement year-over-year.

However, Street expects CHPT’s EPS to remain negative until at least fiscal 2024. And the company’s EPS is expected to decline 57.9% in the current quarter, 24.9% in the next quarter, and 17.1% in the current year.

Negative Profit Margins

CHPT’s trailing-12-month EBITDA margin stood at a negative 100.57%. Its trailing-12-month net income margin and levered free cash flow margin came in at negative 107.68% and 30.42%. In addition, the company’s ROE, ROA, and ROTC are negative 64%, 27.94%, and 29.36%, respectively.

Unfavorable POWR Ratings

CHPT has an overall F rating, which translates to Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an F grade for Value and Stability and a D for Quality. CHPT is currently trading 10.29 times its forward sales, 780.5% higher than the industry average of 1.17, justifying the Value grade. 

In addition, the stock’s relatively high 2.17 beta is in sync with the Stability grade. Also, the company’s negative net income margin and ROE justify the Quality grade.

Of the 92 stocks in the Industrial – Equipment industry, CHPT is ranked #84.

Beyond what I have stated above, view CHPT ratings for Growth, Momentum, and Sentiment here.

Bottom Line

Shares of CHPT have been gaining momentum lately, thanks to its stellar revenue growth and positive analyst rating. However, given its negative profit margins and bleak earnings growth prospects, CHPT is best avoided now.

How Does ChargePoint Holdings (CHPT) Stack Up Against its Peers?

While CHPT has an F rating in our proprietary rating system, one might want to consider looking at its industry peers, Belden Inc. (BDC), Standex International Corporation (SXI), and Preformed Line Products Company (PLPC), which have an A (Strong Buy) rating.

CHPT shares were trading at $15.55 per share on Thursday afternoon, up $1.30 (+9.12%). Year-to-date, CHPT has declined -18.37%, versus a -19.81% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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