EVgo Earnings: Solid Near-Term Results, but Long-Term Competitive Risks Remain
We maintain our $3 fair value estimate and no-moat rating for EVgo EVGO following the company’s second-quarter results. We view shares as overvalued.
EVgo’s network throughput increased 149% year on year to 24.9 gigawatt hours. Higher throughput was driven by continued electric vehicle, or EV, adoption and strength from rideshare drivers, which we expect to be a material percentage of EVgo’s long-term demand. Total revenue increased fivefold year on year as revenue from the eXtend partnership with Pilot Flying J began being recognized in earnest. We view eXtend as a material revenue contributor, but less important to the company’s long-term value given a lower margin profile compared with the company’s owned EV charging network. In addition, the company raised the midpoint of full-year revenue guidance, while lowering the midpoint of adjusted EBITDA. Overall, we make limited changes to our model based on results and the updated guidance ranges.
EVgo ended the quarter with approximately $260 million of cash following a $128 million equity offering during the quarter. The additional funds should support the company’s financial runway into 2025, but we see the need for additional funds in the coming years given the elongated path to profitability.
While EVgo remains well positioned to benefit from rising EV adoption, we view increasing competition and balance sheet constraints as key considerations. In particular, recent announcements by Tesla (opening up its Supercharger network) and by seven leading auto manufacturers to spend $1 billion on a fast-charging network represent long-term competitive risks.
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