Why EVGO Stock Looks a Tempting Long-Term Buy Now

In typical post-merger fatigue, EVGO has fallen after it merged with CLII. What’s the stock's 2025 forecast, and will it go back up?

Mohit Oberoi, CFA - Author

Jul. 12 2021, Published 9:41 a.m. ET

There's been a flurry of SPAC (special purpose acquisition company) mergers over the last month. Among them was that of EV (electric vehicle) charging company EVgo (EVGO) and Climate Change Crisis Real Impact I Acquisition (CLII). However, in typical post-merger fatigue, EVGO stock has fallen. What’s the stock's 2025 forecast, and will it go back up?

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EVgo operates the largest DCFC (direct current fast charging) network in the U.S. Having easy access to fast charges can help address many potential EV buyers' fear of charging running out, thereby boosting EV adoption.

EVgo's charging network

According to EVgo, it has over 800 fast-charging locations, and over 130 million people in the U.S. live within 10 miles of one of its fast chargers. The figure is even higher in California, at 80 percent. The company has locations in 34 states and 65 metropolitan areas.

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EVgo has big plans for growth

EVgo plans to triple in size over the next five years. After its merger with CLII, it received net proceeds of $575 million, which will help it scale up operations. In addition to offering charging services to consumers, the company also has several partnerships—it has teamed up with Tesla, General Motors, Uber, Lyft, and Amazon.

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Additionally, EVgo has a vertical to target governments and utilities to build a public fast-charging network. The Biden administration is betting on zero-emission vehicles and has proposed a $174 billion investment in the endeavor. Charging infrastructure companies will be among the major beneficiaries.

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EVGO stock's forecast for 2025

EV sales are rising quickly, which bodes well for all companies in the EV ecosystem. To support those sales, we’ll need many more charging stations. In 2025, EVgo forecasts sales of $596 million, adjusted EBITDA of $193 million, and free cash flow of $155 million before accounting for growth capex. Even after accounting for that capex, it expects to be nearly breakeven.

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EVGO stock looks reasonably priced

EVgo has a pro forma market capitalization of around $3.1 billion. After adjusting for its $575 million in cash, its enterprise value is around $2.56 billion. Based on EVgo's forecasts, its 2025 enterprise value-to-revenue and enterprise value-to-EBITDA multiples are 4.3x and 13.3x, respectively, which look reasonable.

Will EVGO stock go back up after the crash?

Stock tends to fall after a SPAC merger, as we’ve seen with SoFi and Beachbody. However, asEVGO's valuation multiples still look attractive, it could be a good bet on EVs and Biden’s massive infrastructure plans.


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