ChargePoint Earnings: Lowering Stock Valuation on Below Expectation Results
Margins decline and revenue come in toward the low end of ChargePoint’s guidance.
Key Morningstar Metrics for ChargePoint
- Fair Value Estimate: $8.00
- Morningstar Rating: 3 stars
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: Very High
What We Thought of ChargePoint’s Earnings
We have lowered our fair value estimate for no-moat ChargePoint CHPT to $8 from $11 following the company’s fiscal 2024 second-quarter results. Our valuation cut is driven by a lower revenue outlook, which also results in reduced operating leverage. We view the shares as slightly undervalued in light of our Very High Morningstar Uncertainty Rating.
ChargePoint’s second-quarter results were generally below our expectations. The company’s revenue was toward the low end of its guidance range, while gross margins declined 4 percentage points sequentially to 21% (even when excluding a $28 million inventory impairment). In addition, ChargePoint provided full-year revenue guidance of $620 million (midpoint), which was below our estimate of $721 million.
ChargePoint remains focused on a combination of gross margin improvement and tight operating expense control to achieve positive adjusted EBITDA in the fourth quarter of calendar 2024. We see a combination of product cost improvements as well as a rebound in mix (recovery in high-margin alternating current, or AC, and workplace sales) as keys to near-term gross margin expansion. Regarding operating costs, the company announced a reorganization, resulting in a 10% reduction to its global workforce which is expected to save the company $30 million per year.
ChargePoint ended the quarter with $264 million of cash, down $50 million sequentially. The company plans to utilize a combination of equity issuances via its ATM program and its credit facility to fund near-term operating losses prior to reaching profitability.
We believe ChargePoint is well positioned in the level 2 (AC) charging market but enjoys fewer advantages in the direct current fast-charge segment. We see a relatively balanced risk/reward profile as we await further competitive success in the DC segment and progress toward the company’s profitability goals.
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