ChargePoint stock has 50% upside, according to one Wall Street analyst.
charging point‘S (CHPT -1.54%) Sales and margins fell in recent quarters, and the electric vehicle (EV) charging company recently announced layoffs to cut costs. ChargePoint once again disappointed the market with its just-released fourth-quarter numbers, which led some analysts to lower their expectations. However, some still expect the stock to rise significantly. RBC Capital analyst Chris Dendrinos is one of them.
The analyst lowered his price target on ChargePoint stock to $3 per share from $3.50 on March 6 due to macroeconomic difficulties, but this still represents a solid 50% upside from the stock’s previous day’s closing price.
Does a potential 50% upside mean ChargePoint stock isn’t a buy right now?
Key ChargePoint numbers you need to know
ChargePoint’s fourth-quarter revenue fell 24% year-over-year to $116 million, gross margin fell 22% to 19% and GAAP net loss increased 20% to $95 million.
For the first quarter, ChargePoint expects revenue to decline 19% year over year, at the midpoint of its guidance range of $100 million to $110 million.
That’s not very encouraging, so why is Dendrinos still bullish on ChargePoint stock? This is the company’s planned strategic shift towards a primarily software subscription business.
Is ChargePoint stock a buy now?
During its fourth-quarter earnings conference call, ChargePoint said it plans to “double down” on developing its higher-margin software business. In the fourth quarter, ChargePoint’s network charging system revenue decreased 39% year-over-year, while subscription revenue increased 30%.
A closer look at the numbers reveals an even bigger picture. In the fourth quarter, gross margins for network charging systems were just 7%, while subscriptions generated margins of nearly 40%.
But ChargePoint still has a lot to prove, and it’s too early to believe that its strategy will be successful, given the increasing competition and lack of niche markets in the EV charging industry. I’d like to remain on the sidelines with this stock for now.
Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
