Rising EV Adoption And Urbanization Will Spark Charging Network Expansion

Key Takeaways

• Strong Eaton partnership, next-gen hardware, and rapid EV adoption position ChargePoint for margin expansion and accelerated growth in untapped markets.
  
• Industry consolidation and integrated energy solutions enhance ChargePoint's pricing power and recurring revenue streams, supporting long-term profitability.
  
• Stagnant demand, ongoing losses, and rising competition threaten ChargePoint's revenue growth, margin stability, and future viability as the EV infrastructure landscape rapidly evolves.

Catalysts

Provides electric vehicle (EV) charging networks and charging solutions in the North America and Europe.

• Analyst consensus expects modest incremental growth from the Eaton partnership, but ChargePoint is uniquely positioned to rapidly leverage Eaton's vast $25 billion global sales engine and power management expertise, potentially accelerating revenue growth and expanding ChargePoint's TAM by unlocking new commercial and grid-integrated opportunities at scale.
  
• While analysts broadly see cost structure rationalization and new product rollouts lifting margins, the full impact is likely understated-ChargePoint's next-gen AC hardware, built on a lower-cost architecture, launches into both U.S. and untapped European markets, which could simultaneously drive a step-function increase in hardware volumes and margin expansion, materially impacting both gross margins and net earnings.
  
• Soaring EV adoption rates in both North America and especially Europe, where ChargePoint now operates over 122,000 ports and benefits from zero-emission vehicle mandates, are set to catalyze a durable, exponential increase in hardware sales and high-margin subscription revenues as infrastructure strain rapidly escalates.
  
• The industry is entering a phase of hyper-consolidation, with major competitors exiting and barriers to entry rising, positioning ChargePoint to command dominant market share and enhanced pricing power, leading to sustainably higher long-term revenues and profitability.
  
• As urbanization and smart infrastructure policies proliferate, ChargePoint's ability to provide integrated, end-to-end solutions-including energy management, bidirectional charging, and smart grid/V2X capabilities-uniquely enables recurring ancillary revenue streams and premium services, underpinning recurring revenue and earnings visibility for years to come.

ChargePoint Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on ChargePoint Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming ChargePoint Holdings's revenue will grow by 30.0% annually over the next 3 years.
• Even the bullish analysts are not forecasting that ChargePoint Holdings will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate ChargePoint Holdings's profit margin will increase from -64.4% to the average US Electrical industry of 10.2% in 3 years.
• If ChargePoint Holdings's profit margin were to converge on the industry average, you could expect earnings to reach $91.4 million (and earnings per share of $3.27) by about August 2028, up from $-262.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 21.7x on those 2028 earnings, up from -1.0x today. This future PE is lower than the current PE for the US Electrical industry at 30.6x.
• Analysts expect the number of shares outstanding to grow by 6.97% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

ChargePoint Holdings Future Earnings Per Share Growth

Risks

• Despite steady growth in select segments, ChargePoint reported that network charging system revenue, its largest component, was nearly flat sequentially and down twenty percent year-on-year, indicating that demand for core products is stagnant or even declining, which could pressure future overall revenue growth.
  
• Management repeatedly cited macroeconomic headwinds and uncertainty in government policy as current constraints on customer spending and EV adoption, highlighting the risk that a plateau or slowdown in EV uptake would dampen long-term infrastructure demand and thus revenue growth.
  
• The company's persistent non-GAAP adjusted EBITDA losses, totaling twenty-three million dollars for the quarter, combined with ongoing high operating expenses and a gradually-decreasing but still elevated inventory balance, raise concerns about continued negative cash flow, potentially requiring additional financing that would dilute earnings and hurt shareholder value.
  
• ChargePoint's ambition to expand through new AC hardware and the Eaton partnership could face increasing competitive pressures, as industry trends toward universal charging standards and vertical integration by automakers or energy companies risk eroding ChargePoint's ability to differentiate, thereby compressing net margins and recurring revenue streams.
  
• The company's heavy reliance on innovation cycles and integration with third-party hardware, as seen in its be.ENERGISED product and new architecture rollouts, exposes it to risks from rapid technological change in charging formats or energy management; should competitors leapfrog existing infrastructure, this could lead to obsolescence, lower asset utilization rates, and ultimately decreased returns on investment.

Valuation

• The assumed bullish price target for ChargePoint Holdings is $49.92, which represents two standard deviations above the consensus price target of $22.45. This valuation is based on what can be assumed as the expectations of ChargePoint Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $10.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $895.3 million, earnings will come to $91.4 million, and it would be trading on a PE ratio of 21.7x, assuming you use a discount rate of 12.3%.
  
• Given the current share price of $11.07, the bullish analyst price target of $49.92 is 77.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.