Shares soar as ChargePoint (CHPT) earns upgrade from Bank of America

Bank of America upgraded ChargePoint (NYSE: CHPT) to a Buy rating (From: Neutral) and lowered their 12 month price target for the stock to $14.00 (From $ 15.50) after reassessing the electric vehicle infrastructure company’s line of sight to cash inflection.

Bank of America values ChargePoint on a DCF basis. Analyst Alex Vrabel projects an adjusted EBITDA of $136mm in CY25 and $303mm in CY26, 20% over the implied consensus. Against the current EV, CHPT trades at <10x, in line with power electronic peers, but growing 4x faster on average.

Vrabel wrote in a note, “The likely reason for recent underperformance is cash burn. ChargePoint realized a $290mm drag in free cash flow in CY22 (FY23) and enters CY23 with $295mm in cash and $105mm in Short Term Investments. The valuation for EV chargers is substantially based on terminal value with free cash flow negative operations inherent in the short term. Therefore, cash flow line of sight is a critical gating item for investors and one that has become increasingly challenged in this risk off market. Like our reassessment of EVgo, we rebuild our model from the ground up to focus on cash burn and cash inflection.”

With an updated model, Bank of America expects cash inflection in 4QCY24, matching management’s long stated indications. Vrabel estimates operating cash breakeven in 3Q22 (before working capital) followed by +$19mm in 4Q24.

With operating cash scales to >$100mm in CY25, and expected working capital drag in 2025, Vrabel expects a net cash positive year absent any outside financings. The drivers of this inflection are growth of network and recurring subscription revenues scaling over operating expenses.

For the 1Q24, Bank of America estimates ChargePoint will report an EPS of ($0.14), ahead of the consensus estimate of ($0.17).

Shares of CHPT are up 13.60% in mid-day trading on Tuesday.

By Michael Elkins | [email protected]

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