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Electric vehicle infrastructure company ChargePoint Holdings (NYSE:CHPT) stock may not get the boost from the $1 trillion infrastructure legislation that people seem to expect.
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CHPT stock could certainly use a spark right now.
The company’s share price has fallen 38% so far this year, including a 6% decline over the last month.
It trades today just above $21 a share, well below its 52-week high of just under $50. The shares have struggled since the company went public on February 26 of this year via a reverse merger with special purpose acquisition company (SPAC) Switchback Energy Acquisition Corp.
Shareholders are hoping for a reversal of fortune with ChargePoint now that the U.S. Senate has officially passed the $1 trillion infrastructure bill that aims to bolster the American economy coming out of the public health crisis.
Infrastructure Funding and CHPT Stock
The infrastructure deal allocates $7.5 billion to fund President Joe Biden’s plan to build half a million electric vehicle charging stations across the country.
Biden has said that a consistent and reliable network of electric vehicle charging stations is critical to the mass adoption of battery-powered cars, trucks and SUVs and a move away from gasoline-fueled vehicles.
Currently, about 80% of electric vehicle charging is done in people’s homes. But as automotive manufacturers extend the range of battery-powered vehicles, there is a need for a national network of charging stations.
Industry experts say that electric vehicle charging stations need to become as widespread as gas stations in order for electric vehicles to take off as intended. Right now, the U.S. and most other countries have a patchwork of public charging stations that is not very effective.
For example, Tesla (NASDAQ:TSLA) has developed its own network of charging stations that today number around 2,700 locations. At the same time, Volkswagen (ETR:VOW3) subsidiary “Electrify America” has 647 fast-charging stations across the U.S., and it aims to double that number by 2025.
However, a more coordinated approach and a higher level of investment in electric vehicle charging stations is needed. AlixPartners estimates that $50 billion will be needed to build out a charging network in the U.S. alone to accommodate the expected growth of electric vehicles by 2030.
Currently, there are about 41,400 electric vehicle charging stations in the U.S., according to the Department of Energy. But again, the majority are situated in people’s homes and fewer than 5,000 are fast chargers. That compares with more than 136,400 gas stations across the U.S.
President Biden had lobbied to include $15 billion in the infrastructure bill to fund electric vehicle charging stations but ended up with only half that amount.
Biden also hoped to create an “Infrastructure Financing Authority” through the infrastructure bill, but that proposal ended up being removed during horse-trading between Republican and Democratic lawmakers.
In the end, the bipartisan deal that was approved by the Senate contained about $20 billion less for public transportation and electric vehicles then the White House originally proposed.
On the Right Track
While more investment in charging stations and other electric vehicle infrastructure is needed, industry observers say the new funding out of Washington, D.C. is a step in the right direction and more than had been previously allocated.
ChargePoint is sure to benefit from the new funding. With a total of 132,000 charging ports situated throughout North America and Europe. The California-based company is the global leader in electric vehicle charging stations.
ChargePoint is not yet profitable, which is weighing on its share price. The company reported a loss of $0.17 on revenue of $40.5 million in the first quarter of this year.
However, ChargePoint’s networked charging revenue grew 36% to $26.8 million in the quarter due to rising demand from commercial and residential customers. The company said it added more new customers in the quarter through March 31 than in any previous quarter.
However, ChargePoint downwardly revised its 37% revenue growth forecast for its current fiscal year ending January 31, 2022, to 37% from 46% previously, which caused institutional investors to sell off the stock.
A secondary offering of an additional 12 million shares priced at $23.50 each also appears to have scared away many investors and pushed CHPT stock down further. ChargePoint now has a market capitalization of just under $8 billion and is valued at approximately 38.7 times this year’s expected sales.
Wait To Invest in CHPT
The market opportunity for ChargePoint is huge. The company forecasts that the electric vehicle charging market will be worth $60 billion by 2030 and $192 billion by 2040.
Cowen has pegged ChargePoint’s total addressable market at $27 billion by 2040, making it the investment bank’s “top pick” for electric vehicle charging stocks. However, while the future appears bright for ChargePoint, the company continues to face some significant obstacles on its road to growth and profitability.
As such, investors should wait to purchase CHPT stock until the market for electric vehicle charging stations and the infrastructure needed to support it evolves and matures.
Disclosure: On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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