Green energy stocks have whipsawed over the last two years. After the boom in 2020, we saw a bust in 2021. EV plays have looked weak in 2022 amid the sell-off in growth stocks, but they have rebounded. EV charging companies have also been volatile and ChargePoint (CHPT) fell to its post-merger lows in January 2022.
ChargePoint went public through a reverse merger with Switchback Energy Acquisition (SBE), which was completed in February 2021. The stock trades at almost double the SPAC IPO price of $10 but it's still a fraction of its all-time highs. What’s the 2025 forecast for CHPT stock and is it a good long-term investment?
ChargePoint has a market-leading position in North America.
CHPT has a strong market-leading position in North America and its market share is 7x its nearest competitor in the networked level 2 charging in the region. ChargePoint has three business verticals — residential, commercial, and fleet.
ChargePoint has over 174,000 activated ports. The company has partnered with several OEMs including Volkswagen, Mercedes-Benz, and Xpeng Motors, which should drive its long-term growth.
Recently, CHPT announced a partnership with Goldman Sachs Renewable Power where the latter would provide customized financing for ChargePoint’s customers. ChargePoint has a strong lead in the institutional market and more than half of the Fortune 500 companies are its customers. Overall, ChargePoint has over 5,000 commercial and fleet customers.
The EV market is expected to explode over the next decade
Citing Bloomberg NEF data, ChargePoint said that the percentage of electric cars as a proportion of new cars sold in the U.S. and Europe is expected to be 9.9 percent by 2025. The percentage is expected to rise to 29.2 percent by 2030. All legacy automakers have committed themselves to a zero-emission future.
Ford has doubled down on its EV plans and expects to sell only electric cars in Europe by the end of this decade. General Motors plans to sell only zero-emission vehicles by 2035. Volkswagen has also outlined ambitious growth plans and is looking at the EV leadership position by the middle of this decade. More electric cars on roads mean more business for EV charging companies like ChargePoint.
CHPT stock 2025 forecast
In its merger presentation, CHPT said that it expects to post revenues of $1.43 billion in 2025. The company expects its revenues, which are currently skewed towards the commercial market in North America, to be diversified over the long term. By 2025, it expects the revenues to be spread across both North America and Europe.
Also, ChargePoint expects its gross margins to expand to 41 percent by 2025 as its software revenues increase. Operating leverage would come into play over the long term. CHPT expects its operating expense as a percentage of sales to fall to 29 percent by 2025.
What's the long-term forecast for ChargePoint stock?
ChargePoint expects to become adjusted EBITDA positive by 2024. In 2025, the company expects to post an adjusted EBITDA of $178 million or 12 percent of sales. To be sure, investors have been wary of trusting the long-term projections provided by companies during SPAC mergers. Many companies, including the more hyped ones, are struggling to meet the projections.
However, the outlook for EV charging companies looks positive considering the impetus provided by governments worldwide. The recent rise in gas prices amid the Russia-Ukraine war would only hasten the process of EV transition. Countries will work towards energy self-sufficiency due to the war. This would mean an even faster transition toward electric cars.
CHPT has a market cap of around $6.6 billion, which gives us a 2025 price-to-sales multiple of 4.3x. Looking at the strong double-digit revenue growth that ChargePoint is expected to witness for many years, the multiples don’t seem too high. The stock looks like a good long-term investment if you want to play the electric vehicle story.