ChargePoint Holdings, Inc. (CHPT) in Campbell, Calif., operates electric vehicle charging networks and charging solutions globally. The company went public through a reverse merger with SPAC company Switchback Energy Corporation on March 1, 2021. CHPT became the world’s first publicly traded global electric vehicle (EV) charging network through its listing on New York Stock Exchange. However, the company has an ISS Governance QualityScore of 9, indicating high governance risk.

CHPT reported its fiscal 2023 first-quarter results (ended April 30, 2022) on May 31. The company’s revenues increased 102% year-over-year to $81.60 million. This can be attributed to a 122% rise in networking charging systems revenue and a 63% rise in subscription revenue. Shares of CHPT have risen 10.9% since its quarterly earnings report release, to close yesterday’s trading session at $14.97.

However, CHPT’s gross margin declined 800 basis points from the same period last year to 15%. Its total operating expenses rose 82.6% from the prior-year quarter to $101.94 million. Consequently, its loss from operations widened 92.8% year-over-year to $89.83 million. Its EBT loss amounted to $91.13 million, compared to $82.29 million in earnings reported in the prior-year quarter. Furthermore, its net loss came in at $89.27 million, compared to the $82.29 million net profit reported in its fiscal 2022 first quarter. And its loss per share worsened 67.5% year-over-year to $0.27. The stock declined 49.6% in price over the past year and 25% year-to-date.

Here is what could shape CHPT’s performance in the near term:

Poor Earnings growth Prospects

Analysts expect CHPT’s revenues to rise 83.6% year-over-year to $103.02 million in its fiscal 2023 second quarter, ending July 31. The company’s revenues are expected to increase 101.3% from the same period last year to $130.89 million in its fiscal third quarter. In addition, the $463.96 million consensus revenue estimate for its fiscal 2023 (ending Jan. 31) indicates a 91.5% improvement year-over-year.

However, Street expects CHPT’s EPS to remain negative until at least fiscal 2024. And the company’s EPS is expected to decline 53.6% in the current quarter, 25.7% in the next quarter, and 20.8% in the current year.

Bleak Profit Margins

CHPT’s negative 107.28% trailing-12-month EBITDA margin compares with the 9.71% industry average. Its trailing-12-month net income margin and levered free cash flow margin of negative 107.68% and 32.2%, respectively, compare with 6.76% and 3.54% industry averages. In addition, the company’s ROE, ROA, and ROTC are negative 64%, 27.94%, and 29.26%, respectively.

CHPT’s 20% trailing-12-month gross profit margin is 32.2% lower than the 29.51% industry average. Also, the company’s 0.31% trailing-12-month asset turnover ratio  is 61.7% lower than the 0.80% industry average.

Unfavorable POWR Ratings

CHPT has an overall F rating, which translates to Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an F grade for Value and Stability and a D for Quality. CHPT is currently trading 10.60 times its forward sales, which is 712.3% higher than the 1.31 industry average, justifying the Value grade. In addition, the stock’s relatively high 2.17 beta is in sync with the Stability grade. Also, the company’s negative net income margin and ROE justify the Quality grade.

Of the 92 stocks in the Industrial – Equipment industry, CHPT is ranked #84.

Beyond what I have stated above, view CHPT ratings for Growth, Momentum, and Sentiment here.

Click here to check out our Industrial Sector Report for 2022

Bottom Line

Investors have adopted a bullish outlook on CHPT following its stellar revenue growth reported in the last quarter. However, the company’s bottom line and profit margins are negative. Because multi-decade-high inflation rates persist, CHPT’s cost of operations is expected to rise further, shrinking its profit margins. Thus, we think CHPT is best avoided now.

How Does ChargePoint Holdings (CHPT) Stack Up Against its Peers?

While CHPT has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Standex International Corporation (SXI), Titan Machinery Inc. (TITN), and Preformed Line Products Company (PLPC), which have an A (Strong Buy) rating.

CHPT shares were trading at $15.41 per share on Tuesday morning, up $0.44 (+2.94%). Year-to-date, CHPT has declined -19.11%, versus a -12.94% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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