The electric vehicle (EV) segment is an increasingly crowded space. Comprising a mix of both small startups sensing a disruptive opportunity and legacy auto makers afraid of getting left behind, the competition is only set to intensify as the decade progresses.
Tesla, Nio, Ford and GM are all big names drawing most attention, but all these new energy vehicles need a supporting infrastructure. For EVs, the list includes battery systems, chips, data analysis tools, and charging stations, which is where the aptly named ChargePoint (CHPT) comes in.
The company dominates the level 2 U.S. charging market and Needham‘s Vikram Bagri has a long list for why that is.
“We believe that CHPT's early mover advantage due to a seasoned management team, astute sales staff and superior products designed by the tech heavy workforce, along with its focus on innovation, customer experience, strong product offerings and superior service, support the company's ~70% share of the L2 networked charging hardware market in the US,” the analyst said.
Bagri sees no reason why the dominance should fade. Already boasting 5,000 customers, growing at a “high rebuy rate” of more than 60% – making a big chunk of its hardware sales revenues “somewhat recurring” – and a software attach-rate of ~100, are all not only proof of a quality product and successful business strategy, but show “brand loyalty.”
ChargePoint hardly owns any charging stations and does not “monetize electricity,” – rather, it provides the hardware and software – meaning it is not dependent on the usage of EV chargers. This “capital-light model” is less risky and gives the company more room to “focus on service and innovation.”
Over the next five years, Bagri expects the company to increase revenue at a CAGR (compound annual growth rate) of 49%, although the analyst thinks this might be a conservative estimate if adoption ramps up faster than anticipated and the company makes “accretive and transformative acquisitions.” Whilst the figure could also get a boost should the company expand its market share in the EU and domestically.
The cherry on the top is that the company is “virtually debt free” and has $610 million of cash on tap it can use to “accelerate growth.”
Taking all the above into consideration, Bagri initiated coverage of CHPT stock with a Buy rating and $39 price target. Investors could recharge their banks accounts with an additional 20%, should Bagri’s forecast go according to plan. (To watch Bagri’s track record, click here)
There are four other analysts currently tracking CHPT’s progress, three suggesting to Buy and the other to Hold, all culminating in a Strong Buy consensus rating. At $35, the average price target implies ~8% upside from current levels. (See CHPT stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.