Is ChargePoint stock a good buy for my portfolio?

| April 3, 2022

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electric car parking spot waiting for vehicle

Key Points

  • There are over 174,000 ChargePoint ports in the US and Europe.
  • The EV charging infrastructure investment is expected to reach $192bn by 2040.
  • ChargePoint stock is down nearly 30% in the past year.

ChargePoint (NYSE:CHPT) stock is down nearly 30% in the last twelve months. On the other hand, the share price is up over 33% in the past month as it has gained some positive momentum. Will this momentum continue, and should I add the ChargePoint shares to my portfolio?

Let’s dive in.

The ChargePoint business model

In the world’s drive towards a more climate-friendly environment, individuals, businesses, organizations, and governments have consciously made an effort to reduce the emission of greenhouse gases into the atmosphere. Burning fossil fuels for electricity, heat, and transportation is among the highest emitters of greenhouse gases. And deadlines have been set to reach net-zero emission by 2050. 

In light of the above, there has been a massive adoption of electric vehicles (EVs). For EVs to function well, a system of charging has to exist. It is here that ChargePoint comes into the picture. 

Chargepoint is in the business of creating a fueling network to move people and goods on electricity. It owns one of the largest EV charging networks and provides a comprehensive portfolio of charging solutions.

The company generates its revenue through its Networked Charging Systems, subscription services and other services. By opening one ChargePoint account, a customer is given access to hundreds of thousands of places to charge their EV. Its operations are dominant in North America, but it has begun gradually penetrating the European market. As of 31 January 2022, there were over 174,000 ChargePoint ports – about 51,000 of which are in Europe. 

Should I add the ChargePoint stock to my portfolio?

ChargePoint went public in March 2021 after completing a SPAC merger with Switchback Energy Acquisition Corporation. Since then, ChargePoint stock has been within the range of $9.38 and $49.48 per share. 

Today, on average, someone uses ChargePoint ports every 2 seconds. According to BloombergNEF Vehicle outlook in 2020, the EV charging infrastructure investment is expected to reach $60bn by 2030 and $192bn by 2040. Also, by 2025, 9.9% of new vehicles sold are expected to be EVs, while 29.2% should be EVs in the US and Europe by 2030.

Considering the above, the ChargePoint Stock could soar as EV adoption increases. That certainly sounds like quite a strong tailwind to benefit from. But there are, of course, risks to consider.

Risks lying ahead

ChargePoint Holding’s business is mainly dependent on the ability of EVs to penetrate the market on a large scale. If that fails, the company may not be able to generate meaningful revenue growth. But even if the EV adoption rate climbs as expected, the group is not the only player in the space, with plenty of competition to contend with. And with no profits currently being generated, management is dependent on external financing to fuel its expansion.

These are obviously prominent threats facing this business. But given the potential growth opportunity, I feel it may be a risk worth taking. Therefore, I’m considering opening a small, somewhat speculative position in my portfolio today.

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Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.