ChargePoint (CHPT)

EV charging solutions provider ChargePoint Holdings (NYSE:CHPT) fell short of the market’s revenue expectations in Q4 CY2024, with sales falling 12% year on year to $101.9 million. Next quarter’s revenue guidance of $100 million underwhelmed, coming in 1.3% below analysts’ estimates. Its GAAP loss of $0.14 per share was in line with analysts’ consensus estimates.

Company Overview

The most prominent EV charging company during the COVID bull market, ChargePoint (NYSE:CHPT) is a provider of electric vehicle charging technology solutions in North America and Europe.

Renewable energy companies are buoyed by the secular trend of green energy that is upending traditional power generation. Those who innovate and evolve with this dynamic market can win share while those who continue to rely on legacy technologies can see diminishing demand, which includes headwinds from increasing regulation against “dirty” energy. Additionally, these companies are at the whim of economic cycles, as interest rates can impact the willingness to invest in renewable energy projects.

Competitors in the electric vehicle charging industry include Blink Charging (NASDAQ:BLNK), EVgo (NASDAQ:EVGO), and Wallbox (NYSE:WBX).

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, ChargePoint grew its sales at an incredible 18.9% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. ChargePoint’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 5.6% over the last two years. ChargePoint isn’t alone in its struggles as the Renewable Energy industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Networked Charging Systems and Subscriptions, which are 51.6% and 37.6% of revenue. Over the last two years, ChargePoint’s Networked Charging Systems revenue (hardware) averaged 12.2% year-on-year declines. On the other hand, its Subscriptions revenue (software) averaged 31.2% growth.

This quarter, ChargePoint missed Wall Street’s estimates and reported a rather uninspiring 12% year-on-year revenue decline, generating $101.9 million of revenue. Company management is currently guiding for a 6.6% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 15.9% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will spur better top-line performance.

ChargePoint has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 17.2% gross margin over the last five years. That means ChargePoint paid its suppliers a lot of money ($82.81 for every $100 in revenue) to run its business.

ChargePoint produced a 28.2% gross profit margin in Q4, marking a 8.3 percentage point increase from 19.9% in the same quarter last year. ChargePoint’s full-year margin has also been trending up over the past 12 months, increasing by 18.3 percentage points. If this move continues, it could suggest an environment where the company has better pricing power and stable or shrinking input costs (such as raw materials).

ChargePoint’s high expenses have contributed to an average operating margin of negative 80.4% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, ChargePoint’s operating margin rose by 21.9 percentage points over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to reach long-term profitability.

ChargePoint’s operating margin was negative 53.9% this quarter. The company's consistent lack of profits raise a flag.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although ChargePoint’s full-year earnings are still negative, it reduced its losses and improved its EPS by 49.8% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For ChargePoint, its two-year annual EPS growth of 20.6% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q4, ChargePoint reported EPS at negative $0.14, up from negative $0.23 in the same quarter last year. Despite growing year on year, this print slightly missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast ChargePoint’s full-year EPS of negative $0.65 will reach break even.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

ChargePoint’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 60.1%, meaning it lit $60.09 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that ChargePoint’s margin expanded by 32.4 percentage points during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.

ChargePoint burned through $4.62 million of cash in Q4, equivalent to a negative 4.5% margin. The company’s cash burn slowed from $46.21 million of lost cash in the same quarter last year.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

ChargePoint burned through $159 million of cash over the last year, and its $315.7 million of debt exceeds the $224.6 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the ChargePoint’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of ChargePoint until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We were impressed by how significantly ChargePoint blew past analysts’ EBITDA expectations this quarter. On the other hand, its revenue slightly missed due to weaker performance in its Subscriptions segment. Its revenue guidance for next quarter also fell short of Wall Street's estimates. Overall, this was a weaker quarter, but the stock traded up 1.5% to $0.67 immediately following the results.

Updated: May 22, 2025 at 11:24 PM EDT

Are you wondering whether to buy ChargePoint or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Aside from its balance sheet, ChargePoint is a pretty decent company. First off, its revenue growth was exceptional over the last five years. And while its operating margins reveal poor profitability compared to other industrials companies, its rising cash profitability gives it more optionality. On top of that, its expanding operating margin shows the business has become more efficient.

ChargePoint’s forward price-to-sales ratio is 0.7x. Despite its notable business characteristics, we’d hold off for now because its balance sheet concerns us. If you’re interested in buying the stock, wait until its debt falls or its profits increase.

Wall Street analysts have a consensus one-year price target of $1.25 on the company (compared to the current share price of $0.73).

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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