ChargePoint (CHPT) stock was trading sharply lower in premarkets on July 12. The stock has lost over 41 percent from its 52-week highs. Why is CHPT stock falling and will it recover and go back up in 2021?
ChargePoint provides a charging network for EV (electric vehicle) companies. In March, ChargePoint went public through a reverse merger with Switchback Energy. Several other companies in the EV ecosystem have gone public through the SPAC route. These include EVgo, which is the largest DCFC (direct current fast charging) network in the U.S.
ChargePoint is among the largest EV charging networks in North America and Europe. The company also offers DCFC. It has over 5,000 customers in the commercial and fleet market, which includes almost two-thirds of Fortune 50 customers. The company has over 70 percent market share in the networked level 2 charging in North America which is over 7x its next competitor.
The company has also been forging partnerships that are critical for EV charging companies. In June, it announced a partnership with Mercedes-Benz USA. EV companies have taken a differentiated approach to charging networks.
Tesla has its own sprawling network of Superchargers, but most of the other EV companies are looking at partnerships. While General Motors has partnered with EVgo, Lucid Motors is partnering with Electrify America.
President Biden’s energy policies
President Biden’s energy policies are a mirror opposite of his predecessor Donald Trump. A climate change denier, Trump withdrew from the Paris Climate Deal, which Biden has rejoined. Also, while the Trump administration supported the fossil fuel industry, including coal, the Biden administration is pursuing policies that support the green economy.
The Biden administration has also proposed massive investments in the EV charging industry. For EV adoption to increase, the country will need many more EV charging stations than it has currently.
Why CHPT stock is falling
Looking at the long-term picture, the fall in CHPT stock is due to a sell-off in all green economy stocks. Markets got a little too excited about the sector's prospects, which led to sky-high valuations. Now, the stocks have fallen and look much more reasonably valued than they did at the peak.
On July 13, ChargePoint stock is falling after the company announced that some of the shareholders will be selling almost 13.8 million shares. These shares are being sold entirely by selling shareholders and aren't new shares issued by the company.
Existing shares selling their stake dampen the sentiments because it signals to the market that they are cashing out. Even Virgin Galactic stock tumbled after Chamath Palihapitiya sold the shares that he was holding in a personal capacity.
Will CHPT stock recover and go back up?
Wall Street analysts are bullish on ChargePoint stock. All seven analysts covering the stock rate it as a buy or some equivalent. Its median target price of $39 implies returns of over 35 percent over the next 12 months.
CHPT stock should recover and go back up. The selling pressure after the stock sale announcement should soon fade away and the attention will turn to the stock’s fundamentals. The pivot towards electric cars is for real and charging infrastructure companies like ChargePoint will be the key enablers as well as beneficiaries of the trend.