Regulatory Uncertainty Will Slow EV Charging Buildout Despite Eaton Support

Key Takeaways

• Regulatory uncertainty, weak demand, and macro volatility could limit revenue growth, strain utilization, and prolong unprofitability across ChargePoint's charging network operations.
  
• Heightened technological disruption and aggressive competition risk eroding ChargePoint's pricing power, accelerating obsolescence, and leading to further customer attrition and margin pressure.
  
• Strategic partnerships, market expansion, focus on high-margin services, innovative products, and industry consolidation position ChargePoint for revenue growth, competitiveness, and increased market share.

Catalysts

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

• Despite expectations for rising EV adoption, persistent global regulatory and policy uncertainty-including unpredictable tariffs, shifting incentive policies, and weak policy coordination in major markets-could sharply slow the planned buildout of public charging networks and cause revenue growth to consistently underperform forecasts.
  
• The ongoing volatility in macroeconomic conditions, evidenced by weakened purchasing activity across key geographies, raises the risk that lower EV and charging infrastructure demand will keep utilization rates and ChargePoint's top-line revenue well below potential for multiple years.
  
• Technological risks remain acute as advances such as ultra-rapid charging, battery-swapping solutions, and proprietary networks from dominant automotive or energy companies threaten to render ChargePoint's current infrastructure obsolete, driving up capital expenditure and causing accelerated margin compression or write-offs.
  
• Intensifying competition from vertically integrated OEMs and large energy companies is further commoditizing hardware and software solutions, undermining ChargePoint's pricing power and leading to potential customer churn-this threatens both gross margin expansion and recurring earnings expectations.
  
• ChargePoint's structurally high operating costs, combined with ongoing pressures to raise equity for funding expansion and cover losses, are likely to result in continued unprofitability, operational dilution, and downward pressure on per-share earnings throughout the foreseeable future.

ChargePoint Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on ChargePoint Holdings compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming ChargePoint Holdings's revenue will grow by 15.3% annually over the next 3 years.
• The bearish 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 $63.8 million (and earnings per share of $2.28) 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 bearish analyst cohort, the company would need to trade at a PE ratio of 6.2x 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

• The partnership with Eaton, a global intelligent power management leader, offers ChargePoint access to Eaton's extensive sales network in over 160 countries, significantly expanding ChargePoint's distribution and sales opportunities, which could drive incremental revenue growth over the long term.
  
• Steadily rising EV adoption rates in both North America and Europe, with mandates such as the European Green Deal requiring all new cars to be zero emission by 2035, point to a long-term expansion of the total addressable market for charging infrastructure, likely leading to increased utilization and higher revenues for ChargePoint.
  
• The company's shift to higher-margin subscription and SaaS services, evidenced by a record 60 percent subscription gross margin and ongoing expansion in recurring subscription revenue, supports improved net margins and stronger earnings potential as the installed base grows.
  
• ChargePoint's launch of a new low-cost, innovative AC hardware architecture and its theft-resistant charging technology position the company for enhanced competitiveness, margin gains, and market share expansion across both the U.S. and Europe, directly supporting stronger future revenue and gross profit.
  
• Industry consolidation and the exit of certain competitors, even among large Chinese players, may allow ChargePoint to capture additional long-term market share and benefit from improved pricing power, positively affecting top-line growth and potential operating margins.

Valuation

• The assumed bearish price target for ChargePoint Holdings is $10.0, which represents the lowest price target estimate amongst analysts. 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 more bearish 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 bearish analysts, you'd need to believe that by 2028, revenues will be $624.9 million, earnings will come to $63.8 million, and it would be trading on a PE ratio of 6.2x, assuming you use a discount rate of 12.3%.
  
• Given the current share price of $11.07, the bearish analyst price target of $10.0 is 10.7% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• 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.