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Chargepoint (CHPT.NYSE), charging higher in the EV world!

Tesla is undoubtedly going to be THE biggest stock in the next decade or so. To me, it is like Apple in the mid 2000s.

In this article however, I am going to introduce another stock that can probably be as big as Tesla in terms of growth potential.

It is Chargepoint CHPT founded in 2007.

https://www.chargepoint.com

BACKGROUND

Chargepoint CHPT is one of the world’s largest EV charging networks with over 98 million charging sessions delivered and more than 1000 employees.  The company is based in Silicon Valley and aside from being one of the the largest in US, it also operates in 9 European markets as well as in India.

The company went public in March this year via an SPAC and become the world’s first EV charging network company to go public.

To date, it has 118,000+ charging points globally, as well as 200,000+ accessible via roaming network charging. The charging services CHPT offered is for fleet of all types and sizes from commercial, residential to light, medium and heavy duty vehicles. Charging points are not just at home, but at many convenient points for on-route charging and car parked-charging etc.

BUSINESS MODEL – HARDWARE + SOFTWARE + PARTS & SERVICES

CHPT don’t just rely on its upfront revenue from hardware charging stations, but also recurring revenue from SaaS and parts and labour maintenance services. Take note that installation does not go through CHPT’s books though.

CHPT’s SaaS revenue is derived via installed based x annual subscription. With the cloud-based software App, you will know the charged level of your car, you can use it to find and access charging and waitlist on charging queues etc. CHPT also have software management system for Fleet owners that can help to plan their routes in relation to electrification to optimise energy usage of the vehicles.

 

From the above chart, you can clearly see its revenue diversity in terms of upfront revenue and recurring revenue. The recurring revenue will only get stronger as more charging stations are delivered.

ACQUISITIONS – SOFTWARE FOCUS

CHPT’s focus in software can be one of the reasons why it can emerge as victors over competition.

Since going public, CHPT acquired two European companies with focus in software and electric fleet management. The first acquisition is German “has.to.be”, a charging software firm backed by VW for Euros 250 million. The company manages more than 40,000 charging points in Europe with access to 250,000 via roaming agreements.

The second is ViriCiti for Euro 75 million, giving the company access to a much larger software feature such as charger management and vehicle charger scheduling, battery health monitoring, vehicle operations data and greater vehicle telematics capabilities.

STRONG CASH & GROWTH POTENTIAL

The growth of CHPT is in no doubt in tandem with EV’s dominance and the world’s call for less carbon emission. However this have to be supported by infrastructure in place.

The good news for CHPT is Biden will sign the USD 1 trillion bill for infrastructure improvements next Monday. The Trudeau administration set a goal of 100% zero-emission vehicle sales by 2035. EU has earlier also announced policy to bring down emissions with planned spending of 80-120 billions euros on infrastructure by 2040.

From Sep Report for Q2 2022 Earnings Call.

  • Quarterly revenue increased 61% year over year
  • Full-year revenue guidance raised 15% to $225 – $235 million
  • Activated ports exceed 118,000 as of July 31 with over 5,400 in Europe and over 3,700 DC fast charge ports
  • Announced agreement to acquire European e-mobility technology provider has·to·be, and acquired eBus and commercial vehicle management provider ViriCiti
  • Introduced global fleet charging portfolio and announced seamless charging integration in-vehicle and in-app with Mercedes-Benz USA

Accordingly, for fiscal Q3, we expect total revenue of $60 million to $65 million at midpoint an increase of 72% versus Q3 of last year and a sequential increase of over 11%. For the fiscal year, we are taking our revenue guidance up 15% from $195 million to $205 million to $225 million to $235 million at the new midpoint representing a 57% increase year-on-year.”

CHPT finished the quarter with approximately $618 million, with approximately $44 million from warrant exercises resulting from the redemption of our public warrants, offsetting cash used by operations.

 The company funded in Q3 thus far approximately $80 million of our $90 million acquisition of ViriCiti and on completion of regulatory review, we expect to fund the cash component of the has·to·be acquisition at approximately $135 million potentially also in Q3. As a reminder, this acquisition is a blend of cash and stock…

Below balance sheet from latest quarterly result.

 

NEGATIVES – LOSSES & COMPETITION

The company is still very much in loss making.

Revenue for 6 months ending July is 96 million but loss from operations is 120 million. However this is net out by some change in fair value of assumed common stock warrant liabilities and contingent earnout liability of 110+ million and net loss is a mere 2.6 million.

*Head scratching*!

That said with the cash in hand and ability to raise fund (I think), the loss making in the short run is definitely still sustainable.

Another big negatives of this business is the many competition. E.g. Blink Charging and of course Tesla have their own charging although CHPT charging is compatible to Tesla too.

Moving from pure EV players, CHPT will also face competition from existing Oil majors. For example, Royal Dutch Shell has plans to launch 500,000 charging stations in the next four years. There’s also BP investing $7 million in IoTecha, a smart EV charging firm to supports BP’s goal of providing over 70,000 public EV charging points throughout the world by 2030.  Then there are also Hyundai  selling Level 2 home charging stations that could help to ease range anxiety.

PIE IS BIG ENOUGH

The good news is the pie will be large enough. Even if Shell and BP hit their targets, there will still be at least half a million charging stations to be built in the next decade.

FYI : The price of the networked station ranges from $499 to $749 found on this article in 2015 for homes: https://www.chargepoint.com/about/news/chargepoint-home-499-worlds-most-advanced-home-ev-charger/

The ChargePoint Express 250 is engineered to fast charge current and next-generation electric cars, buses and trucks cost $40,800 found in this article. https://smartchargeamerica.com/electric-car-chargers/commercial/chargepoint-express-250/

While that may not be pleasing to the ears, but remember that ChargePoint’s future success is also based on the recurring revenue and monthly subscription fees. That is why the company is investing so much in software now.

Read: ChargePoint as a Service  https://www.chargepoint.com/products/cpaas/

Also, FYI in 2015’s article: The ChargePoint Multi-Family Home Service consists of a fully installed Level 2 charging station with comprehensive 24/7 support and the ability to allow drivers to manage their charging through a mobile app for $39.99 per month, plus a one-time activation fee. Refer to link here.

 

Ok for now, please do your own due diligence and read the disclaimer in this blog.

PS: I am invested in Chargepoint.

 

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