Electric vehicle (EV) stocks were all the rage in 2020, but this year has seen most of them lose momentum. Investors are worried about their generally steep valuations. Macro-economic sluggishness has also proved to be a brake on the sector’s stocks.
However, we believe that the recent decline in EV stock prices now presents investors with an opportunity to purchase shares of high-growth companies that are part of an expanding addressable market at lower valuations.
Here we look at two such companies, Nuvve (NVVE) and ChargePoint (CHPT), whose price momentum has slowed this year and which are now trading at more attractive levels, to see which stock is a better bet right now.
Nuvve Corp is a small-cap company with large-cap potential
Renewable energy sources need storage and EVs have a built-in storage system. San Diego-based Nuvve Corp develops V2G (vehicle-to-grid) software technology that bridges the gap between these two sectors and helps regulate energy on the grid.
The company delivers a grid integrated vehicle platform that transforms EVs into grid assets when charging and uses them to store and resell energy to the electric grid. Its cloud-based application ensures each EV has sufficient charge for planned trips and e then calculates the power available that can be sold to the grid. NVVE serves public organizations, businesses and homes. It aims to reduce the cost of electric infrastructure and carbon emissions through its multiple programs.
The company generates sales from bidding on energy markets, while seeking energy savings for customers. Its technology also aims to lower the cost of EV ownership and support the integration of renewable energy.
NVVE expects its sales to total $32 million in 2021 and $93 million in 2022. Given its $171 million market capitalization, the stock is trading at a forward 5.3x price to sales multiple, which is attractive given the company’s growth rate. Nuvve can benefit from secular tailwinds that could drive its top-line higher in the coming decade because the V2G market is estimated to grow to $17 billion by 2027.
The company enjoys a first mover advantage and owns key patents that will make it difficult for competitors to enter this highly disruptive market. NVVE stock is trading at $10.3, which is over 50% lower than its record high of $22.74.
ChargePoint is valued at a market cap of $6.7 billion
ChargePoint is a much bigger company than NVVE, with a market cap valued at $6.7 billion. It sells hardware, software and services related to EV charging. It operates more than 115,000 charging ports globally, which it aims to increase to 2.5 million by 2025. CHPT operates in North America and Europe. It is a market leader in North America’s charging network segment, where it commands a 73% market share.
CHPT customers purchase hardware infrastructure from the company and pay for its installation. This asset-light model helps it to charge a subscription fee for its networked software. So, ChargePoint can be likened to an SaaS (software-as-a-service) company, and its subscription-based model should help it generate recurring cash flows. The company also generates sales by providing after-sales support and warranties.
In its fiscal year 2021, ChargePoint sales were approximately $147 million. Analysts tracking the company expect it to report sales of $202 million in fiscal 2022 and $344 million in 2023. This growth in top-line will allow ChargePoint to narrow its loss per share to $0.26 in 2023 from $7.77 in its fiscal year 2021.
However, in Q4 of its fiscal year 2020, ending January 31, ChargePoint sales were down 2% year over year at $42.39 million. But its total operating expenses were up 7% at $44.22 million. It reported an operating loss of $35.3 million, while its net loss stood at a whopping $103.6 million compared to net loss of $33.8 million in the prior-year period.
The bottom line
The shift to clean energy solutions is accelerating at a fast clip and infrastructure companies, including ChargePoint and Nuvve, will benefit from this trend. This means suggests that Nuvve’s and ChargePoint’s upside potential is big.
But we think that while ChargePoint’s leadership position might attract investors, Nuvve’s lower valuation and its ability to grow revenue at a faster clip makes it a winning bet for 2021.
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NVVE shares were trading at $10.65 per share on Tuesday morning, up $0.04 (+0.38%). Year-to-date, NVVE has declined -38.15%, versus a 11.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...
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