Are electric vehicle recharging stocks exceeded?


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The euphoria surrounding electric vehicles (EVs) has also spread from automakers to EV charging stocks. Flashing charging (NASDAQ: BLNK) the stock jumped about 2,000% last year. Likewise, shares of Switchback Energy Acquisition Corporation, a special purpose acquisition company (SPAC) focused on the energy sector, jumped 220% in 2020 after announcing a merger with ChargePoint (NYSE: CHPT) in September. The merger was completed in February.

Another PSPC that merges with an electric vehicle charging company is Climate change crisis Real impact I Acquisition Corporation (NYSE: CLII). The stock jumped 65% on the day it announced its merger with EVgo, which is expected to close this quarter. Likewise, the shares of Beneficial financing TPG Pace (NYSE: TPGY) more than doubled the day PSPC announced its merger with EVBox, which is expected to close in June. Likewise, the shares of SPAC Turtle Acquisition II (NYSE: SNPR) exploded by more than 30% after announcing a merger with Volta. The merger is expected to be completed during this quarter.

So there is a lot of hype surrounding EV charging stocks, many of which are using the SPAC route to go public. But is the enthusiasm justified, or are these actions overrated? Let’s find out.

A rapidly growing market

Investor enthusiasm for these stocks is certainly not unfounded. According to the International Energy Agency (IEA), the number of electric vehicles in circulation around the world, including plug-in hybrid electric vehicles, is expected to increase from less than 10 million in 2019 to 140 million by 2030. This the number could rise to 245 million if governments around the world cooperate and adopt policies to promote clean energy. To this end, automakers and battery makers have committed more than $ 300 billion in investments to bring out new models of electric vehicles and increase production capacity.

Image source: Getty Images.

Of course, more electric chargers would be needed to power the growing number of electric vehicles. Global investments in electric vehicle charging infrastructure are expected to reach around $ 387 billion by 2040. The IEA estimates that electric vehicle demand for electricity will increase six-fold by 2030. Notably, in 2019 , up to 6.5 million chargers, out of a total of 7.3 million EV chargers around the world were private. Yet public charging is expected to play a key role in the growing adoption of EVs. By some estimates, up to a third of the energy demand of electric vehicles could go to public charging by 2030.

Support from President Joe Biden, including plans to install 500,000 public charging stations by 2030, has added to the enthusiasm for electric vehicle charging stocks.

Can EV Charging Businesses Become Profitable?

While the excitement is understandable, in some cases it might have been overdone. Before entering, investors should consider that none of the EV charging companies are profitable at this time. This is because the development of a recharging infrastructure is capital intensive. Business revenues are expected to grow over the years as the number of EVs increases. Yet it will be several years before these businesses become profitable, if at all. This is because it is difficult to generate big profits by selling electricity.

Additionally, the preference for home charging may result in limited demand and margins for public chargers. Charging networks from EV manufacturers, such as You’re here own network, may also further limit the demand for common public chargers.

For companies that have yet to merge with their respective PSPCs, it may be too early to decide on a potential winner. Climate Change Crisis Real Impact I Acquisition Corporation, TPG Pace Beneficial Finance and Tortoise Acquisition II are over 40% of their 2021 peak. While mergers are ongoing, PSPC prices are moving according to their companies’ expectations. charging of respective EVs. In particular, with modified valuations, there is a risk that some of these transactions will not be completed. The hype surrounding these PSPCs therefore seems exaggerated.

The best charging stock for electric vehicles

Among publicly traded companies, ChargePoint looks better than Blink Charging. With annual revenue of $ 146 million, ChargePoint has a market capitalization of approximately $ 6 billion. That makes more sense than Blink Charging’s $ 1.1 billion market cap with just $ 6.2 million in annual sales.

CHPT Revenue Graph (Yearly)

CHPT turnover (annual) given by YCharts

Blink Charging has not delivered a year of expected profitability in EBITDA, while ChargePoint expects to generate positive Adjusted EBITDA by 2024.

With more than 132,000 charging points in North America and Europe, ChargePoint already has a strong network and reach. The company’s revenue for fiscal 2021 (ending Jan. 31) has exceeded expectations, lending some credibility to its forecast to break even EBITDA by 2024. Before impact COVID-19, ChargePoint’s revenue grew 60% in 2019. The company plans to grow revenue at this rate, on average, through 2026.

Another key factor that sets ChargePoint apart from other EV charging providers is its focus on commercial customers. The company’s income is not tied to electricity or the use of its station. Instead, it generates revenue, for example, from a corporate client who wants to offer free invoicing to their employees. ChargePoint has already secured more than 4,000 business customers. However, the company has yet to prove the viability of its business model.

So while ChargePoint looks better than other EV charging stocks right now, it also faces some risk. Conservative investors may want to let this story unfold before they jump in.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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About Robert Pierson

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