Accelerated EV Adoption Will Drive Charging Network Expansion

Key Takeaways

• Shift to high-margin software and strategic alliances may accelerate revenue and margin growth beyond market expectations.
  
• Rising demand, European expansion, and industry consolidation position ChargePoint to capture increased market share and recurring earnings.
  
• Ongoing unprofitability, stagnant hardware and subscription sales, and overreliance on North America expose the company to persistent losses and limited growth opportunities.

Catalysts

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

• Analysts broadly agree ChargePoint's restructuring and cost discipline will deliver margin expansion, but the accelerating shift toward high-margin software and subscription services, now nearing 40% of revenue with record 60% subscription gross margins, could drive a step-change in overall company net margins much faster and higher than consensus expects.
  
• Analyst consensus highlights strategic partnerships as a growth lever, yet the transformative Eaton alliance immediately multiplies ChargePoint's addressable market and sales reach, with Eaton's $25 billion global presence poised to unlock multi-year incremental revenue well ahead of current forecasts.
  
• As utilization rates for EV charging infrastructure approach critical levels in major markets and government policy remains strongly supportive, the need for rapid charger deployment may outstrip consensus projections, sharply boosting hardware and installation revenues for ChargePoint.
  
• ChargePoint's scale in integrating third-party chargers and its European expansion-facilitated by new home, commercial, and fleet products launching this year-positions the company for outsized share gains as fleet and workplace electrification accelerate, expanding recurring revenue streams and supporting higher long-term earnings.
  
• With attrition and voluntary exit of competitors, ChargePoint has a unique opportunity to capture disproportionate market share during industry consolidation, setting the stage for accelerated top-line growth and potential earnings inflection as the market matures.

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 29.9% 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 $3.26) 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 -0.9x today. This future PE is lower than the current PE for the US Electrical industry at 28.0x.
• 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 company reported that its network charging systems revenue was flat sequentially and down twenty percent year-on-year, suggesting stagnation or even decline in core hardware sales, which undermines long-term revenue growth prospects.
  
• Management repeatedly flagged macroeconomic uncertainty, tariff issues, and policy headwinds as factors making customers more cautious with spending, which could prolong flat or declining sales and suppress overall earnings.
  
• Despite highlighting margin improvements, ChargePoint continues to be unprofitable at the operating level, posting a non-GAAP adjusted EBITDA loss of twenty-three million dollars this quarter and an even higher loss under standard accounting, raising concerns about persistent operating losses and negative impact on shareholder equity if this trend persists.
  
• The majority of revenue-eighty-five percent-remains concentrated in North America, with European growth hampered by weakness in key markets such as Germany, leaving the company exposed to regional downturns and at risk if plans for further international diversification stall or fail.
  
• Management's guidance for the next quarter is cautious, with revenue projected to remain flat or only slightly up at best, and subscription revenue largely flat sequentially, pointing to ongoing challenges in stimulating either volume growth or higher-margin recurring revenues; this could compress net margins and limit earnings upside in the near to medium term.

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 $894.3 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 $10.5, the bullish analyst price target of $49.92 is 79.0% 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.