As far as EV charging stocks go, ChargePoint (CHPT) has garnered most of the attention of late, and for good reason.
After all, there’s massive political support for growth in EV charging stations in the U.S. The announcement that Biden hopes to have half a million charging stations in the U.S. in short order is great for the leading EV charging company in America. Accordingly, this favorable political environment has likely more than been priced into CHPT stock today. (See ChargePoint stock analysis on TipRanks)
Indeed, ChargePoint is the industry leader in level 2 charging in North America and Europe. The company’s 132,000 charging locations in these key competitive continents speaks to ChargePoint’s dominance in this growth sector. ChargePoint’s current market share of roughly 70% of the networked level 2 charging market in North America makes this the pre-eminent play for those bullish on the growing need for EV infrastructure globally.
Furthermore, one key selling point behind ChargePoint is related to the company’s IP and the fact that it manufactures and uses its own proprietary technology. For those who believe charging stations will be largely a separate industry altogether from EV companies (though Tesla (TSLA) is playing in this space in a big way), ChargePoint looks like the way to play this space. It’s a pure-play on long-term growth in a sector that has legs.
Let’s dive into why investors may want to press pause on getting too bullish on this stock.
Competition and Long-Term Margin Concerns Not Priced In Yet
When many investors think of EV charging plays, they’re often looked to (and valued) more like growth/tech stocks. In reality, there’s reason to think of EV charging plays more like gas stations. Or, more accurately, the gas stations of the future.
As most investors know, the gas station business can be a good one in which to invest. A favorite stock of many investors right now is Alimentation Couche-Tard (ANCUF).
However, these businesses have historically low margins on fuel. The explanation for this is simple: extremely high levels of competition in a sector selling a ubiquitous commodity. Indeed, gasoline really isn’t any different than electricity – the price is set at the market (or regulatory) rate, and those selling this product are price-takers.
Accordingly, companies like ChargePoint may become the convenience store purveyors of the future. That’s how companies like Couche-Tard have produced their impressive margins and long-term growth profile.
Still, selling charging stations to commercial clients as its primary line of business doesn’t scream “profitable long-term growth strategy.” At least, not to those with a long enough investing time horizon to consider how this company will realistically make money once EV charging stations are installed everywhere.
Indeed, competition is heating up, and heating up quickly, in this space. ChargePoint will need to combat the rising insurgence of Blink (BLNK), Nuvve (NVVE), and three other EV charging players looking to go public via the following SPACS: Tortiose Acquisition II (SNPR), Climate Change Crisis Real Impact I (CLII), TPG Pace Beneficial Finance (TPGY).
ChargePoint isn’t the only game in town. Investors know this. Nevertheless, this company’s share price certainly looks to be valued as if ChargePoint will hold this market share lead forever. Indeed, investors may want to check that thesis right now.
What Analysts Are Saying About CHPT Stock
According to TipRanks’ analyst rating consensus, CHPT stock comes in as a Moderate Buy. Out of 2 analyst ratings, there are 1 Buy and 1 Hold recommendations.
As for price targets, the average analyst ChargePoint price target is $33.50. Analyst price targets range from a low of $28.00 per share to a high of $39.00 per share.
Bottom Line
Investors should be thinking about EV charging stock as the gas stations of the future. Questions such as how ChargePoint will earn growing cash flows on selling a commodity are really the correct questions to be asking right now.
Installations of EV charging stations are certainly likely to skyrocket over the near-term. However, for those with a longer-term vision for this sector, it can be difficult to see the value in owning ChargePoint stock right now.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
Apple (AAPL) is talking with Chinese companies CATL and BYD about setting up an electric vehicle battery factory in the U.S., according to a Reuters report citing confidential sources. The factory would supply batteries for Apple’s planned electric vehicle (EV).
The discussions are still in the early stage and it is not clear if the parties will agree. CATL, which supplies Tesla (TSLA), is expanding its battery manufacturing capacity and has plans for a new battery plant in Shanghai, near Tesla’s manufacturing facility.
Apple has not yet publicly revealed its EV project. But the company is believed to be working on a passenger vehicle that could go into production in 2024, according to Reuters. (See Apple stock analysis on TipRanks)
Apple is insisting that its EV battery suppliers build U.S. manufacturing facilities, according to the report. But CATL is reluctant to set up a U.S. manufacturing plant because of political tensions between the U.S. and China.
"My understanding is that Apple is talking about building advanced battery production factories here, here in the U.S.," Reuters quoted senior White House economic adviser Jared Bernstein as saying.
The Biden administration has proposed an infrastructure spending plan that includes a budget of $174 billion to boost the U.S. domestic EV market.
Citing highlights from Apple’s WWDC 2021 event, Morgan Stanley analyst Katy Huberty reiterated a Buy with a price target of $161 on Apple stock. Huberty’s price target implies 27.03% upside potential. The analyst noted that the upcoming software updates and hardware launches will allow Apple’s growth to continue for a third consecutive year in Fiscal 2022.
The analyst said, “Apple's vertically integrated ecosystem of world-class hardware, software, and industry-leading services remains a key point of differentiation that competitors cannot replicate.”
Consensus among analysts is a Moderate Buy based on 19 Buys, 5 Holds, and 2 Sells. The AAPL average analyst price target of $157.58 implies 24.33% upside potential to current levels.
AAPL scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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TESLA (TSLA) revealed that it has abandoned its plans to develop Model S Plaid+, the most expensive upgraded version of its sedan.
Following the announcement, shares of the company increased 1% to close at $605.13 on June 7.
TESLA CEO Elon Musk commented, “Model S goes to Plaid speed this week. Plaid+ is cancelled. No need, as Plaid is just so good.”
He added that the upgraded version was cancelled as Plaid itself could go from 0 to 60mph in less than 2 seconds. (See TESLA stock analysis on TipRanks)
Notably, Model S Plaid+ would have been the most premium version of its sedan, priced at around $150,000. Key features of the cancelled model included 1,100 horsepower, 520 miles of range on a fully charged battery, and an acceleration of 0 to 60 mph in less than two seconds.
Recently, Wedbush analyst Daniel Ives reiterated a Buy rating and a price target of $1000 (65.3% upside potential) on the stock.
Overall, the stock has a Hold consensus rating based on 10 Buys, 7 Holds and 6 Sells. TESLA average analyst price target of $640.29 implies 5.8% upside potential from current levels. Shares of TSLA have jumped 218.5% over the past year.
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