ChargePoint shares reenergised ahead of Q2 earnings release

ChargePoint shares have struggled to regain the positive momentum it saw in early 2022. However, the charging network stock was trending higher in early August after the Biden administration passed the Inflation Reduction Act, giving it a much-needed boost ahead of its earnings report.  

Despite ChargePoint [CHPT] shares pulling back from the highs it set in early August, investors are still upbeat about the electric vehicle (EV) infrastructure company’s Q2 earnings release on 30 August.  

The stock closed at a high of $18.87 on 12 August after the Inflation Reduction Act was passed in the US, which included tax breaks and grants to improve EV infrastructure. The charging network company is preparing for a surge in demand as EV ownership increases across the country.

The announcement was a welcome boost to ChargePoint shares, which are down 17.6% in the year-to-date at $15.69 on 25 August. The stock had hit a 52-week low of $8.50 in early May as investors fell out of favour with growth stocks. However, since then, shares have regained some momentum as positive tailwinds have led to increased investor confidence in the EV charging space.

Other EV stocks have also benefited from the uptick in sentiment. Evgo [EVGO], which also provides the US with EV chargers, has seen its share price grow 27.6% in the last month (through 25 August). Blink Charging [BLNK] shares have risen 19.7% in the same period.

Q1 revenue grows as costs begin to creep higher

In ChargePoint’s Q1 results, which were released at the end of May, it announced record revenue of $81.6m, growing 102% from the same period the year before. This was led by strong EV sales, which meant greater demand for charging points. Statista data revealed that the number of EVs sold globally rose from 3.1 million in 2020 to 6.7 million in 2021.

The company’s gross margin sat at 15% in Q1, marking a decline from 23% the year before, due to a dramatic rise in operating costs as inflation drove up the prices of raw materials and staffing expenditure. The total cost of revenue more than doubled to $69.5m from $31.3m in the year before as a result of these higher costs. Higher operational and revenue costs is expected to be a reoccurring theme in ChargePoint’s upcoming results.

The company is predicting Q2 revenue to sit between $96m and $106m as it anticipates further increased demand for the services it offers. At the highpoint of these estimates, it represents an increase of 161.7% increase on Q2 revenue last year. Revenue for the full year is expected to sit between $450m and $500m, which is also considerably higher than the $242.3m seen in fiscal year 2022.  

EV charging sector stimulus boosts sentiment

There has been a series of government spending plans put in place in the last few years that carry the aim of making EVs more mainstream. Even when these efforts don’t allocate grants for EV charging infrastructure directly, more EVs on the road help to naturally boost demand for the chargers.

In the US climate bill, the $7,500 tax credit for buying a new EV has been extended and the government gives $4,000 to those who purchase a used one. In a further boost to EV charging companies, the Biden administration announced in February that it was planning to award nearly $5bn over the next five years to build thousands of electric vehicle stations along interstate highways.

The UK has also committed £1.6bn towards improving and expanding the country’s EV infrastructure, with around 300,000 public chargers by 2030. On 24 August, it announced that it was installing more than 1,000 EV charge points as part of a £450m scheme.

As a result, analysts are optimistic ahead of ChargePoint’s Q2 results announcement. Out of 20 analysts polled by the Financial Times, five gave the shares a ‘buy’ rating, nine believed they would ‘outperform’ and the remaining six rated the shares a ‘hold’. From 19 of these analysts offering 12-month price forecasts, the median target was $20, which represents a 27.4% upside on 25 August closing price.