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A week of EV charging earnings from the likes of ChargePoint Holdings (New York Stock Exchange: CHPT), Wallbox (WBX) and Load Flashing (NASDAQ: BLACK) offered a mixed bag in terms of impressions. While the latter was able to beat expectations and drive shares higher on earnings day, the top two fell sharply on weak 2023 forecasts.
A similar note in earnings filings, however, was the sign that competition will only intensify as the EV transition continues to accelerate.
Chasing gains in cargo
Another common refrain in earnings impressions was a lack of earnings. None of the three reporting companies has yet been able to achieve profitability, although Wallbox’s headcount reductions from 2023 indicate the industry’s focus on improving this dynamic. ChargePoint also called the ability to achieve profitability “super important,” especially as investors are increasingly focused on efficiency and earnings dynamics.
However, he indicated that the company may not achieve adjusted EBITDA profitability in the next two years. This timeline for ChargePoint was at least met with approval by analysts who held the name to be generally bullish.
“With cost headwinds beginning to ease and ChargePoint implementing cost reduction measures and improving operating leverage, we remain confident that ChargePoint is on track to become free cash flow positive by the end of CY24,” he said. JP Morgan analyst Bill Peterson told clients. “ChargePoint’s balance sheet is also relatively strong, which will be beneficial in this phase of growth, with facilities available to opportunistically increase liquidity. We continue to believe that ChargePoint’s scale and leadership in charging verticals are underappreciated, as are recurring revenue opportunities from its software and service offerings that could accelerate in the coming years with an expanding customer base.”
Importantly, he added that it doesn’t look like the company will need to raise capital in 2023. The same can’t be said for each of its peers, though, many of which have fallen much more than ChargePoint in the past year.
Peterson recently downgraded EVgo (NASDAQ:EVGO) ahead of its mid-March earnings result, citing capital intensity and site delays as key concerns.
“As a result of higher inflation and input costs, we believe that capital intensity will be higher than we previously expected,” he wrote. “Overall, we believe the risk/reward is relatively balanced at present and we are moving EVGO to a Neutral rating.”
featured partners
One of the keys to consider when assessing the space is who might be backing which names as macroeconomic headwinds and increased competition converge in 2023.
ChargePoint benefits from partnerships with car manufacturers such as Toyota, Fisker and Mercedes Benz. The latter projected a total of more than 400 centers containing a total of 2,500 high-power chargers in North America by 2030. Additionally, partnerships with Volvo and Starbucks were highlighted as key gains for the company in its most recent earnings call. .
Meanwhile, EVgo is a key partner for GM, which is rapidly accelerating EV efforts in its own right. The company also agreed to offer a car-charging discount program for rideshare drivers on the Lyft platform while signing an agreement with Amazon for Alexa integration.
Wallbox (WBX) also indicated a key new partnership in its earnings call, telling analysts that “a new partnership with a very large European OEM has been signed” to start in 2023. The name of the particular automaker was not disclosed. . CEO Enric Asunción added that Walmart has agreed to test the company’s chargers at 50 locations across the US.
These key partners could be crucial in helping support each company, as cash burn is likely to remain a problem in the near term. In addition, increased EV adoption and the expected increase in popularity of specific makes and models could be a key driver for individual partners.
That said, increased competition from open charging networks, including Tesla’s, required by recent legislation, as well as Ford’s construction of a BlueOval open charging infrastructure, are only likely to put pressure on the space. crowded. That’s not to mention efforts by BP, Shell and other traditional energy companies to enter the cargo space in search of diversification.
Competition to consolidation?
The crowded nature of the space could certainly lead to consolidation in the end, as the Shell for Volta (VLTA) deal foreshadowed earlier in the year.
With many of the stocks populating the space battered over the past year and continuing to bleed cash, valuations in the low hundreds of millions could make names like Blink (BLNK) targets for oil companies looking to bolster ESG bona fides. and gain additional exposure to Electric Vehicle Charging. Certainly, with executives pursuing buyback programs worth tens of billions of dollars, an acquisition costing less than $1 billion wouldn’t be too onerous.
Conversely, automakers or other charging networks looking to expand their footprint could pursue M&A activity. In fact, some partners may turn to acquirers if the path to profitability as an independent company for some names is too long.
Less optimistically for investors in these stocks, bankruptcy is also not a remote risk. Continued capital increases in a rising interest rate environment could create an existential problem before long. In the end, that potential could be very good for short sellers, with EVgo shorting at almost 40%, while ChargePoint and Blink are looking for more than 17% and 21% short, respectively. .
Read more about earnings expectations for the next EVgo report.
