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Electric vehicle (EV) charging stocks have witnessed some euphoric movements in the recent past. There are strong reasons to believe that the EV charging industry will witness healthy growth in the coming years. However, most of electric vehicle charging stocks seem to have run ahead of their fundamentals. It therefore makes sense to wait for a correction before considering fresh exposure to electric vehicle charging stocks.
Let’s first talk about the industry tailwinds.
In March 2021, Cathie Wood’s Ark Invest Management opined that Tesla’s (NASDAQ:TSLA) stock price could hit $3,000 by fiscal year 2025. This would imply a market capitalization of $3 trillion for the electric vehicle company. To some, this price target might sound unrealistic. However, I would not rule-out the possibility of the target being achieved.
Going by the trend and various estimates, it’s not just the next ten years that belongs to electric vehicles. The next two decades will witness sustained growth for the EV industry. According to Deloitte, the EV industry is expected to grow at a CAGR of 29% over the next ten years.
If this growth estimate holds true, there needs to be a big investment allocated towards charging infrastructure. It goes without saying that electric vehicle charging companies are positioned for strong growth.
Estimates suggest that the EV charging station market was worth $9.24 billion in FY2019. The market size is expected to increase to $70 billion by FY2026. This would imply an attractive CAGR of 33%.
Let’s therefore talk about some quality electric vehicle charging stocks, which are presently overvalued, but worth keeping on your investment radar.
Blink Charging (NASDAQ:BLNK)
Climate Change Crisis Real Impact I (NYSE:CLII)
ChargePoint Holdings (NYSE:CHPT)
Tortoise Acquisition Corp. II (NYSE:SNPR)
4 EV Charging Stocks to Avoid: Blink Charging (BLNK)
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BLNK stock touched an all-time high of $64.50. The stock has subsequently corrected to current levels around $30. However, valuations remain stretched, and it might make sense to wait for further correction.
To put things into perspective, the company reported revenue of $6.2 million for FY2020. The company’s stock currently trades at a market capitalization of $1.37 billion.
In terms of business growth, the outlook is positive. As adoption of electric vehicles increases in U.S. and Europe, the company stands to benefit. The company already has several products for residential and commercial charging solutions. With more products in development, the company seems to be high on innovation.
On May 11, Blink Charging also announced the acquisition of Blue Corner. The latter is an EV charging company based in Belgium and has a portfolio of 7,071 charging ports. It’s worth noting that Europe is a faster growing EV market than the United States.
Blink Charging is likely to continue pursuing aggressive organic and inorganic growth. I would however be more comfortable in considering exposure when the stock trades at 40 to 50 times revenue.
Electric Vehicle Charging Stocks: Climate Change Crisis Real Impact I (CLII)
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EV charging companies have mainly listed through special purpose acquisition companies. In January 2021, EVgo Services announced a special purpose acquisition company (SPAC) business combination with Climate Change Crisis Real Impact I Acquisition.
The deal values EVgo at $2.6 billion. However, the company’s revenue guidance for the current year is $20 million. Therefore, the company is valued at 130 times revenue. Clearly, the business combination is at stretched valuation.
In terms of positives, the company will have $575 million in net proceeds from the business combination for aggressive expansion. Further, EVgo already has commercial relationship with companies that include Tesla and General Motors (NYSE:GM). The company also has fast charging solutions for ride-share operators like Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT).
Coming back to the company’s growth guidance, EVgo expects to deliver revenue of $596 million for FY2025. For the same year, adjusted EBITDA is guided at $193 million. However, the company will be free cash flow positive only in FY2026.
In general, growth projections from companies listed through SPACs have been on the optimistic side. Therefore, even from a FCF perspective, valuations look stretched.
It therefore makes sense to wait for the SPAC business combination to complete. Once EVgo is listed, there will be a better entry opportunity.
Electric Vehicle Charging Stocks: ChargePoint Holdings (CHPT)
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CHPT stock is probably among the most attractive electric vehicle charging stocks. For FY2022, the company expects revenue of $198 million. At a current market capitalization of $6.3 billion, the stock is trading at 32 times revenue.
It’s worth noting that CHPT stock has already corrected from a high of $49.48 to current levels around $21.30. However, an important point to note is that ChargePoint reported revenue of $144.5 million in FY2020 and $146.5 million in FY2021.
It remains to be seen if the company can meet the guidance of $198 million in revenue for FY2022. The coming quarters will provide some insight. Therefore, it makes sense to wait for one or two quarters before considering a meaningful exposure to the stock.
In terms of business positive, ChargePoint has presence in the U.S. and is expanding presence in Europe. Further, the company’s revenue is diversified. Besides network charging systems, the company also derives revenue from software solutions. The latter is likely to boost long-term cash flows.
Electric Vehicle Charging Stocks: Tortoise Acquisition Corp. II (SNPR)
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On Feb. 8, 2021, Volta Industries announced that the company will go public through a business combination with Tortoise Acquisition. The deal values Volta at $2.0 billion.
SNPR stock surged to a high of $18.3 on the announcement of the business combination. However, the stock has corrected to around $10. I would still be cautious, considering the company’s valuation at $2.0 billion. For FY2021, Volta Industries has guided for revenue of $47 million. Therefore, the company is valued at 43 times current year revenue guidance.
Volta Charging does have a robust growth projection. The company expects revenue to surge to $826 million by FY2026. I would take that estimate with a pinch of salt. Further, the company expects to be EBITDA positive by next year.
As of FY2020, the company had 1,507 charging stations installed. Of this, 1,112 were already contracted. Further, the company expects to ramp-up the number of charging stations to 26,242 by the end of FY2025.
In addition, charging station screens serve as a source of advertising revenue for the company. Currently, the company has 3,014 installed screens and a pipeline of 20,136 screens. Therefore, over the next five years, the company will have a diversified revenue model.
I believe that it makes sense to wait for the closing of the business combination. Once Volta Industries is listed, the stock can be considered.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
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