The EV segment is a rising industry offering big opportunity to not only electric vehicle makers, but to companies providing ancillary products – from batteries to chips to supporting infrastructure.

However, are some of the projections for these companies too aggressive, especially considering how competitive the field is expected to become?

Needham analyst Vikram Bagri says that investors have expressed reservations on whether the analyst's outlook for EV charging player ChargePoint (CHPT) is too optimistic. However, Bagri thinks these worries are overblown.

“While investors share our enthusiasm about the company's positive fundamental outlook and CHPT's strong competitive position,” Bagri said, “We heard some concerns about the pace and timing of margin recovery, the impact of increased competition, a potential share overhang, and optimistic LT revenue targets. We discussed these concerns with CHPT management and came away with a reinforced conviction in the potential for upside in CHPT shares.”

One of investors’ sticking points has been the long-term revenue outlook, but Bagri notes his estimates are below the company's projections and also do not account for any “meaningful contributions” from CPaaS (communications as a service) revenue, which has bettered expectations so far. Neither does the outlook include government incentives relating to President Biden's infrastructure bill. Additionally, Bagri says his forecast incudes a “conservatively modeled” ~$150 million worth of acquisitions.

As far as competition from other well-funded companies, Bagri says the company highlighted the fact it has overcome fierce competition in the past to establish a “dominant position.” Management also believes that attributes such as “continued innovation, stronger customer relationships & more thoughtful capital deployment,” are hard to replicate and will keep it ahead of the pack.

Moreover, revenue growth in the commercial segment is expected to help improve gross margins which should reach mid-to-high 30s eventually. Finally, a big stock sale due to largest shareholder Michael Linse offloading shares is unlikely, says Bagri, because of his close relationship with CEO Pasquale Romano and strong support of the project.

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As such, Bagri rates CHPT shares a Buy rating and his $39 price target indicates a potential one-year upside of 39%. (To watch Bagri’s track record, click here)

Bagri’s colleagues are just as confident. All 5 recent analyst reviews are to Buy, naturally culminating in a Strong Buy consensus rating. At $37.20, the average price target is just below Bagri’s and suggests shares will add an extra 20% of muscle over the coming months. (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.

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