To give credit where it's due, Tesla(NASDAQ: TSLA) undeniably led electric vehicles (EVs) into the mainstream. It didn't do it alone, to be sure. But, by making battery-powered automobiles cool, it also made them marketable. Time and practicality took care of the rest.
The next chapter of the EV revolution is upon us. While Tesla remains prominently featured in it, other names are emerging as compelling investment opportunities. Battery makers and charging-infrastructure providers in particular are finding fast-growing demand, which of course becomes revenue, setting the stage for eventual profitability. The key is simply more scale... which is coming, given electric vehicles' long-term growth outlook.
Risk-tolerant investors looking for the next big winner from the EV space might want to put ChargePoint Holdings(NYSE: CHPT) stock on their radars -- if not in their portfolios -- sooner than later. It's trading at a discount right now, but this may not be the case for much longer.
ChargePoint is in the right place at the right time
As you might imagine, ChargePoint offers EV-charging solutions. The Motley Fool's in-house research arm points out that a little over half of the United States' 69,632 electric vehicle charging stations use ChargePoint's tech, which will work for nearly any make and model of EV. It's got a respectable presence in Europe as well.
The company doesn't just manage its own network of consumer-facing stations. It works with businesses and owners of electric vehicle fleets to provide them with their own private charging solutions, or charging stations that serve their customers.
The underlying business model is the same in all cases, however -- monetizing the chief recurring consumable of the EV movement.
It's still only scratched the surface of its potential. BloombergNEF predicts that annual sales of EVs will nearly double between now and 2027, when they're expected to reach a yearly pace of 30 million units, en route to the sale of a projected 70 million EVs in 2040. This growth will, of course, dramatically inflate the need for charging solutions. Straits Research believes the worldwide electric vehicle charging infrastructure market is set to grow at an average annualized pace of nearly 23% through 2033, while the charging station sliver of the business should grow by 44% per year for the same timeframe. Like the EV market itself, however, this brisk pace of expansion could persist for many years beyond that mark.
As the biggest name in the business on one continent and a known name on another, ChargePoint Holdings stands to benefit greatly from this prolonged tailwind.
Owning this stock is an adventure
That doesn't necessarily mean ChargePoint stock will be easy to own between now and then, particularly in the nearer part of this future.
Shares have already proven that they're capable of prolonged poor performance, giving up 98% of their late 2020 peak value following ChargePoint's SPAC deal with Switchback Energy. The euphoria was clearly strong at the time, but the company was also clearly not ready to deliver as hoped/hyped. The lingering COVID-19 pandemic certainly didn't help matters either. Neither has the company's lack of profits.
The bulls were too excited four years ago, and they're too pessimistic now. The EV movement is just now reaching its full stride, setting the stage for sustained forward progress.
Its business can still be inconsistent. ChargePoint's top line is expected to be down to the tune of 18% for the fiscal year ending this month. But analysts also expect its revenue to grow nearly 20% for the year ahead before accelerating to a growth rate of more than 30% the year after that, in line with the overall industry's anticipated growth.
Perhaps more importantly, the company continues to chip away at its net losses, and should continue doing so. At its current fiscal trajectory, ChargePoint could reach net-profitability in calendar 2027.
Data source: StockAnalysis.com. Chart by author.
Not right for everyone, but maybe right for you
Obviously, none of this promise has helped the stock yet. Indeed, shares are currently toying with rereaching their record low, hit just earlier this month despite the bullish backdrop firming up.
However, this is one of those few cases where sustained growth is practically inevitable. It's just that no investors want to be among the first to take the plunge, fearing others won't follow that lead anytime soon.
There's the rub, and the reason this stock might not be the right kind of pick for everyone. There's just a lot of historical psychological baggage still holding this ticker back. That's never easy to shake off, but it's especially difficult to shake off when the company's market cap is a mere $486 million (as ChargePoint's is). This small size keeps it off many would-be buyers' radars despite its otherwise compelling story and future.
If you can stomach the above-average risk and volatility -- and are willing to keep close tabs on it -- there's a bullish case to be made for adding this ticker to your portfolio. You just might want to limit your risk by keeping any initial position in ChargePoint small. You can always add to it as the company becomes more proven and starts pushing its shares upward.
Should you invest $1,000 in ChargePoint right now?
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
