From time to time, industry news behaves like a tidal wave – lifting everything in the path. Such was the case with ChargePoint Holdings, Inc (NYSE: CHPT) that rose over 7% on the news of the Tesla-Hertz deal.
Yet, it is too early to conclude whether this rally will keep the stock off the yearly lows.
Bull Thesis is Not Without Challenges
Few expressions will be as popular as "range anxiety" as we slowly but surely, get into the era of EVs. On the other hand, hybrid and EV owners in the UK have likely slept more soundly through October, as persistent supply chain issues created gasoline shortages, leaving the internal combustion vehicle owners in queues for hours.
However, perfecting charging infrastructure will follow the trends. Stifel (NYSE: SF) certainly believes so, as they initiated the coverage on ChargePointHoldings with a Buy rating. The bank is optimistic about the trend, expecting ChargePoint to get positive free cash flow as early as 2024.
That, in turn, would mean that ChargePoint needs to improve its revenue scalability, as it faced issues with operational cash burn increasing in line with the revenue growth. Although the company has no debt and no near-term liquidity issues, cash burn could become a problem facing accelerating growth.
A Look Into The Ownership Data
ChargePoint Holdings is a reasonably big company. It has a market capitalization of US$7.4b. Typically institutions would own a significant portion of a company this size. Looking at our data on the ownership groups (below), it seems that institutions own shares in the company.
What Does The Institutional Ownership Tell Us About ChargePoint Holdings?
Institutional investors commonly compare their returns to the returns of a widely followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
We can see that ChargePoint Holdings has institutional investors, and they hold a good portion of its stock. This implies the analysts working for those institutions have looked at the stock, and they like it. But just like anyone else, they could be wrong.
If multiple institutions change their view on a stock simultaneously, you could see the share price drop fast. It's, therefore, worth looking at ChargePoint Holdings' earnings history below.
We note that hedge funds don't have a meaningful investment in ChargePoint Holdings. Looking at our data, we can see that the largest shareholder is Linse Capital LLC, with 19% of shares outstanding. For context, the second-largest shareholder holds about 7.8% of the shares outstanding, followed by ownership of 7.2% by the third-largest shareholder. In addition, we found that Pasquale Romano, the CEO, has 0.7% of the shares allocated to their name.
Let's look at 7 of the top shareholders. They account for roughly 51% of the register, implying that along with more significant shareholders, there are a few smaller shareholders, thereby balancing out each other's interests somewhat.
Researching institutional ownership is an excellent way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be helpful to find out their aggregate view on the future.
Insider Ownership Of ChargePoint Holdings
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management runs the business, but the CEO will answer to the board, even if they are a member of it.
Insider ownership is positive when it signals leadership is thinking like the actual owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our most recent data indicates that insiders own some shares in ChargePoint Holdings, Inc. This is a big company, so it is good to see this level of alignment. Insiders own US$141m worth of shares (at current prices). Most would say this shows the alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
With a 31% ownership, the general public has some degree of sway over ChargePoint Holdings. While this size of ownership may not be enough to sway a policy decision in their favor, they can still make a collective impact on company policies.
Private Equity Ownership
Private equity firms hold a 40% stake in ChargePoint Holdings. This suggests they can be influential in critical policy decisions. Some investors might be encouraged by this since private equity can sometimes encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Although institutions acquired a significant stake in ChargePoint, we can see that VC/PE firms still own a majority. We expect these stakes to switch places which can result in elevated volatility eventually.
While it is well worth considering the different groups that own a company, other factors are even more important. To that end, you should be aware of the 2 warning signs we've spotted with ChargePoint Holdings.
If you would prefer to discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full-year annual report figures.
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.