Better Buy for 2022: Chargepoint vs. EVgo

With the increasing number of electric vehicles (EVs) on roads and advantageous government policies, the EV and ancillary industries are poised to grow significantly. More precisely, the global EV charging station market is expected to lift at a CAGR of 30.26% over the next six years, hitting $111.9 billion in the terminal year. 

The infrastructure bill has been acting as one of the vital growth catalysts for EV charging companies amid the Biden administration's plans to spend over $7.5 billion on building about 500,000 EV charging stations in the U.S. However, EV charging stocks have been losing momentum since then, providing investors with the opportunity to scoop up their shares at a discount. 

With this in mind, today I’ll analyze and compare two EV charging stocks: ChargePoint Holdings, Inc. (CHPT) and EVgo, Inc. (EVGO). Founded in 2007, CHPT offers EV charging networks and charging solutions in the U.S. Based in Los Angeles, California, EVGO is an EV charging company that has about 800 DC fast-charging station locations in the U.S. Over the past six months,‌ ‌CHPT stock has plunged 38%, and EVGO has fallen about 26%. ‌ 

Recent Developments 

On December 8th, Oppenheimer analyst Colin Rusch kept bullish views on ChargePoint after the company had released a mixed third-quarter report. The firm cited sustainable growth across all segments and a strong recurring revenue figure. The analyst retained its Outperform rating for ChargePoint with a price target of $40.

On January 5th, EVgo appointed Dennis Kish as its new Chief Operating Officer, which had previously served for such well-known names as Google, Qualcomm, and NXP. The company's CEO, Cathy Zoi, said, “Having a dedicated executive with Dennis Kish’s experience in infrastructure and technology will further bolster EVgo’s leadership in scaling operations, deploying larger sites for our public network and fleet customers, and in maintaining best-in-sector uptime and reliability.” 

Recent Quarterly Performance & Analysts Estimates 

For its fiscal third quarter ended October 31st, 2021, ChargePoint's total revenues increased 78.8% year-over-year to $65.03 million, beating analysts' estimates by $1.77 million. The lion's share of the company's revenues makes up for two segments  - Networked Charging Systems and Subscriptions. Consequently, networked charging revenue increased 111% to $47.5 million, while subscription revenues came in 24% higher at $13.4 million in FQ3. However, CHPT disclosed GAAP EPS of ($0.21), missing consensus by $0.05. 

Also, the company has boosted its FQ4 and full-year guidance. It expects to make revenue of $73-$78 million in the fourth quarter. ChargePoint upgraded its full-year outlook to $225-$235 million. 

The company’s EPS is expected to grow 90.90% year-over-year to ($0.16) in its fiscal fourth quarter of 2022. Analysts expect ChargePoint's revenue to increase 79.69% year-over-year to $76.17 million in the current quarter.

In terms of EVgo's financials, its total revenue has increased by 73% on a year-over-year basis to $6.18 million in the third quarter of 2021, driven by double-digit growth in retail charging and ancillary revenues. Besides, the company surpassed Wall Street's consensus revenue by $0.76 million.

The company's adjusted gross profit stood at $1.4 million, compared to $1.0 million as of 3Q2020, leading to an improvement in gross profit margin by 80 bps to 22.2%. However, EVgo's Adjusted EBITDA has been reported at ($14.27 million) versus ($5.4 million) million in the third quarter of 2020. 

Currently, Wall Street expects EVGO's earnings to stand in the fourth quarter of 2021 at ($0.12) per share. However, analysts anticipate Evgo's Q4 top line to remain flat on a quarter-over-quarter at $6.17 million.

Comparative Valuation 

In terms of Forward EV/Sales, EVGO is currently trading at 79.06x, which is substantially higher than CHPT, whose multiple is currently 19.04x. When it comes to the FWD Price/Sales multiple, EVGO's P/S multiple of 28.02x is 36% higher than CHPT's 20.47x. 

However, their EV/Sales and P/S multiples exceed the sector’s median threshold of 2.02x and 1.65x, respectively. 

Conclusion

I believe CHPT, at these levels, is a better investment than EVGO. In my opinion, post-earnings CHPT sell-off was an overreaction as the company had improved its main operating metrics and boosted guidance. Besides, the company has better financials compared to EVGO. Finally, ChargePoint looks relatively cheaper and attractive from the valuation standpoint, considering its forward growth rates.

CHPT shares were trading at $14.52 per share on Wednesday morning, up $0.22 (+1.54%). Year-to-date, CHPT has declined -23.78%, versus a -3.29% rise in the benchmark S&P 500 index during the same period.

Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.

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