Three Issues Pressuring ChargePoint's (NYSE:CHPT) Stock

In 2022, it would be foolish to deny that electric vehicles (EVs) are not the future of transportation. However, transitory periods open up new opportunities, in this case in developing and maintaining recharging networks.

ChargePoint Holdings, Inc. ( NYSE: CHPT ) rose to prominence as a company that would tackle that problem. Yet, in the last 16 months, the stock has been on a steady decline.

Check out our latest analysis for ChargePoint Holdings

What Weighs on the Chargepoint Stock?

Volatility is not unusual for high-growth unprofitable stocks, as news can shift the long-term outlook. Following the latest earnings, CHPT experienced a 75% rally followed by a 25% decline. Here are 3 of the possibly most significant downward catalyst we see for the stock.

Insider selling and short-interest

Over the last 12 months, a single insider purchase came from a director who bought 12,500 shares for about US$250k. On the other hand, insider selling was prevalent, totaling almost 15 million shares for over US$300m.

While the largest sale (US$7.4m at US$23.50 per share) occurred well above the current price, we're still uneasy with this kind of discrepancy between the insider selling. Furthermore, short interest is reasonably high at 12.5% of the float.

The chart below shows insider transactions over the last year. By clicking on the graph below, you can see the precise details of each insider transaction.

If you like to buy stocks that insiders are buying rather than selling, you might love this free list of companies. (Hint: insiders have been buying them).

Convertible Debt and Stock Dilution

Two weeks ago, ChargePoint announced the latest round of investment by Antara Capital. A US$300m principal amount in senior convertible notes due 2027. Cash interest payments will be at 3.5% per year and payment-in-kind interest at 5%.

A convertible note is a form of short-term debt that converts into equity. ChargePoint prefers not to take on debt as the balance sheet is debt-free. However, convertible notes will keep on diluting the existing shareholders – in a way, they function the same as inflation. The past year's total shares outstanding grew by 13.9%, which is a considerable amount.

The recent Dip in Gross Margins

The attentive audience noticed a dip in gross margins in the latest earnings report. GAAP gross margin was 21.7%, a steep decline from 24% in the previous quarter.

CFO Rex Jackson explained that it is a part of the customer acquisition strategy. However, while still highly unprofitable, depressing the margins to facilitate the growth might not sit well with some investors. Of course, there are other issues we've spotted while researching ChargePoint. It has 4 warning signs we think you should be aware of.

On the other hand, if you're looking for businesses with low debt, and high returns on equity, you might want to explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered.

For this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

What are the risks and opportunities for ChargePoint Holdings?

NYSE:CHPT

ChargePoint Holdings

ChargePoint Holdings, Inc. provides electric vehicle (EV) charging networks and charging solutions in the United States and internationally.Show more

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Rewards

• Trading at 28.9% below our estimate of its fair value

• Revenue is forecast to grow 28.7% per year

Risks

• Shareholders have been diluted in the past year

• Significant insider selling over the past 3 months

• Currently unprofitable and not forecast to become profitable over the next 3 years

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Share Price

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Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.