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Last month, our crack squad of MBAs did what most media outlets do at the end of the year: We chilled with some Gelato #33 and reflected on where we’ve been and where we’re going. This especially applied to our Disruptive Technology Portfolio and how it will evolve in 2022 alongside our risk-averse tech investing methodology. We wrote a couple of articles in December about how we want to rebalance the portfolio, such as focusing on market cap and other rules-based criteria to remove as much subjectivity from our investment strategy as possible.
For example, green technology is currently one of our most heavily weighted categories, mostly due to the performance of the world’s largest renewable energy company that also happens to pay a nice, tidy dividend. We’re also holding the only solar-themed ETF worth holding, which we’ll probably dump because a) it’s redundant to our other holdings and b) it’s an ETF, and we recently decided to phase out ETFs in favor of high-quality tech stocks. How we reallocate that money is for Nanalyze Premium annual subscribers to know, but we’re always reassessing the verticals we cover to see if a thesis is reaching a certain tipping point that merits an investment.
That’s why we want to revisit what’s been happening with electric vehicle (EV) charging station company stocks.
Special purpose acquisition companies (SPACs) have dominated public listings since 2020, accounting for 60% out of 1,418 IPOs during a two-year period. Suddenly, entire emerging technology sectors have opened up for
fleecing retail investors. And we’re certainly seeing the risks emerge in near real-time, such as the collapse in value of many space SPACs. We’ve also been leery of EV stocks, which have similarly proliferated amid the volatile SPAC boom.
That brings us to the sudden eruption of EV charging station company stocks. In 2018, investors had but one option – a former OTC stock called CarCharging that was uplisted on the Nasdaq under the name Blink (BLNK). Then, three EV charging station companies went public last year through deals with SPACs. Operating one of the largest EV charging networks in the world, ChargePoint (CHPT) debuted in March, followed by EVgo (EVGO) in July and Volta (VLTA) in September. On deck are Tritium and now a European startup called EO Charging, both with pending SPAC mergers.
The bull investment thesis behind EV charging stations, a pick-and-shovel play on the electric vehicle theme, is pretty obvious. As adoption of electric vehicles increases, the need for more public places to charge them will increase as well. In a previous article about investing in public charging stations, we noted that worldwide an estimated $55 billion is expected to be invested in charging infrastructure through 2030. The passage of the Bipartisan Infrastructure Law last November will put $7.5 billion toward charging infrastructure and 500,000 stations in the United States. Europe is also starting to ramp up, with plenty of room to grow, as more than 65% of charging stations are located in only five countries.
On the bear thesis side, everyone knows that the 150,000 gas stations in the United States literally make pennies off of the gas they sell, relying on profit from selling coffee, cigarettes, food, and porn. That begs the question: Can an EV charging station make money by only selling electricity? What creative ways are companies employing to monetize EV charging stations? Government subsidies will likely continue to prop up this industry for the foreseeable future. And while there are plenty of grand gestures and ambitious goals to switch to all or mostly EVs by the majority of industrialized nations in the next 10 to 15 years, those commitments rarely hit their target dates.
This would lead us to expect, let us say, some bumpy revenue streams as EV infrastructure rolls out worldwide. Yet there is no denying that EVs represent perhaps one of the biggest disruptions to transportation since the Model T rolled off the assembly line, so somebody is going to figure out how to make money aside from Tesla (TSLA). The question is whether a pick-and-shovel play in EV charging is a viable road. While several EV charging stocks are too rich for our tastes, others have a simple valuation ratio under 40 which makes them fair game
Let’s briefly look at the nuts and bolts of each electric vehicle charging stock before drawing a few conclusions.
Founded in 2007, Silicon Valley-based ChargePoint is the largest of the EV charging station company stocks by both market cap and revenues, as illustrated above. ChargePoint generates revenue primarily through the sale of its networked charging systems for commercial, fleet, and residential customers; cloud service subscriptions that enable consumers to locate, reserve, authenticate, and transact EV charging sessions; and extended parts and labor warranty services that are typically paid for upfront.
For Q3-2021, revenue hit $65 million, an increase of 79% from $36.4 million in the prior year’s same quarter. Recurring subscription revenue for cloud services accounted for 20% of revenues, and the company has bumped up its full-year revenue outlook from between $225 and $235 million to between $235 and $240 million. This year ChargePoint also made a couple of acquisitions in Europe, as it looks to expand its footprint outside of North America. It acquired a cloud-based e-mobility EV charging and enterprise software platform called has·to·be for more than $232 million and spent about another $80 million on ViriCiti, which provides electrification solutions for electric buses and commercial fleets. The former deal means that ChargePoint now has one the largest charging networks in Europe, with more than 50,500 charging ports, along with an additional 195,000 ports through roaming agreements.
Founded in 2010, Los Angeles-based EVgo has the second largest market cap, despite posting the least amount of revenue among the group at $6.2 million for Q3-2021, representing an increase of 29% compared to a year ago. The company claims to operate the largest public DC fast-charging network for EVs with 800 locations in the United States, all powered by 100% renewable energy through the use of renewable energy credits. DC fast-chargers can bring EV batteries up to 80% in about 20 minutes.
About half of all revenues come from individual drivers, who can choose from three different rate plans. Its next highest-generating revenue source is “ancillary,” which consists of everything from maintenance fees to data-driven services to enterprise customers. And about 11% of its revenue is derived from regulatory carbon credit sales, which is government dependent and how Tesla helps pad its bottom line. Another 11% is from commercial fleet customers.
Founded in 2001, Tritium out of Brisbane, Australia is merging with a SPAC called Decarbonization Plus Acquisition Corporation II (DCRN). We did a deep dive into the deal last year, so there’s not much to add until the merger is completed. A few things to note: Around 70% of Tritium’s revenues come from Europe, which is now outpacing China in EV sales, according to Pew Research Center. Currently, almost all of those revenues are from selling hardware, with the company projecting that recurring software subscriptions will make up more than a quarter of its sales by 2026. And Tritium is also looking at ways to monetize connected car data through its charging stations, which has attracted investments from companies like Palantir (PLTR).
At the time of our analysis, we offered our best compliment to the stock – there’s nothing to dislike about Tritium, aside from its choice to go public using a SPAC – but are waiting for the deal to go through before revisiting this one.
Founded in 2010, San Francisco-based Volta Charging generated $8.5 million in revenue in Q3-2021 – an increase of 77% compared to the year before. It mostly makes money through paid media advertising – what it calls Commerce and Behavior – displayed on its charging station kiosks installed at retail locations. It’s a business model that has been in play for several years at gas stations. One company that operates in that space, GSTV, claims that the “average viewer spends up to 3.9 times more on products at stores that are a regular part of their consumer journey within three hours of visiting a gas station.”
Aside from ad dollars, Volta’s other major source of revenue (about 15%) is generated through Network Development, which mainly consists of installation services, operation and maintenance fees, installed infrastructure for utility companies, and charging station products. A new source of revenue is what Volta calls PredictEV, a machine learning solution for infrastructure planning. It recently inked a multi-year “commitment” from Southern Company, one of the largest utilities in the United States, to use PredictEV for its transportation electrification programs. That has generated all of $60,000 so far.
We last covered Blink Charging in 2018 after it uplisted to the Nasdaq, but we didn’t find too many reasons to invest in the company then – and a Bloomberg article last year reinforced our aversion. In our May 2018 article, Blink sported a market cap of about $120 million on just $2.5 million in 2017 revenue. The latest quarterly report shows that the company is finally generating some revenues with $6.4 million in Q3-2021 which means they’ll achieve meaningful revenues this year of more than $10 million. It’s overvalued with a market cap 10X where it was 3 1/2 years ago at about $1.12 billion – and that’s after losing about -40% of its value over the last year. Talk about volatility, which is exactly what risk-averse investors avoid like the plague. (Incidentally, “avoid like the plague” seems to be a particularly meaningless platitude given how many people are fruitlessly trying to avoid running into The Rona.)
Still, Blink has made some moves that at least give it the veneer of respectability. In 2021, for example, the company made its own foray into the European market by acquiring Belgium-based EV charging operator Blue Corner and its network of more than 9,500 charging points for $24 million.
Finally, there’s EO Charging, a UK-based EV charging station company that announced its intention to merge with a SPAC called First Reserve Sustainable Growth Corp. (FRSG) last year. Founded in 2014, EO Charging is focused primarily on EV charging for vehicle fleets, including DHL, Tesco, and Amazon. The company is particularly proud of the last customer, given how often it mentions Amazon in the flashy investor deck.
While the company is the smallest by market cap at under $800 million, it generated an estimated $28 million in 2021, which puts it slightly ahead of both Blink and EVgo based on annualized revenue. Like Tritium, we’re waiting for the SPAC merger to finalize and dust to settle, but have no intention of taking a position, considering it doesn’t meet our threshold of $1 billion market cap. It’s the only stock of the lot that falls below a $1 billion market cap.
That was obviously a very superficial read on each company, but it’s enough to tell us which ones we can eliminate outright:
That leaves ChargePoint and Tritium. The latter is still pending closure of the SPAC merger, so we wouldn’t touch Tritium stock until sometime after that. Additionally, if we were to invest in a sector like EV charging stations, we want to invest in the biggest and best. ChargePoint certainly qualifies as the biggest. In a future article, probably after it files its fourth quarter and year-end report, we’ll take a closer look at ChargePoint to see if it’s truly the best – and if best is good enough.
The hype around green technologies like electric vehicles has made it extremely risky for investors to find value in the thesis. That may be changing, as most of the EV charging company stocks have slid in value over the last year, with ChargePoint dropping about -50% during the last 12 months, giving it a simple valuation ratio of 24 – another reason to see if it’s time to buy in.
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Why charge away from home? Brand service signs will adorn thousands of five-minute battery swap stations as gas pumps dwindle. The coffee, smokes, and fresh pizza will be retained.
That’s a pretty good point. so when will electric cars come with hot-swappable battery packs?
You might be interested in the spin-offf from ABB. On slide 16 of this deck you will find information about the electric mobility division.
This is a very useful comment Thomas, thank you. We took the liberty of consolidating your comment a tiny bit 🙂
This means we’ll need to vet this possible IPO against ChargePoint as well – if the ABB spinoff IPO happens in 2022 that is.
Joe, thank you for the summary. This started to get attractive, all techs are down and the EV hype widows have turn their back to the all related EVs. I’ve been looking CHPT very closely, in fact have been selling some puts on it with the expectation to get assigned. I think it is time to add to the portfolio.
You are quite welcome!
We see the EV thesis as having three themes – batteries, charging infrastructure, and vehicles (cars and trucks). Once the dust has settled from the SPAC mania, we will iterate through each of these themes and find the most compelling companies. We’ve now done that for charging with this piece, so next we need to do a focused piece on ChargePoint.
We have limited slots in our tech stock portfolio so we’re looking to make one – max two – bets in the EV space. We’re in no hurry as hype around electric vehicles has been extremely high and needs some time to simmer down.
Thank you for the comment Joao!
My thoughts, currently home charging system are low power, so long time to charge. There there are technical and economical issues to install fast charging system at home. Battery swap is an interesting solution (NIO has been trying), but the charging systems are getting faster and faster, I don’t think will be necessary to create business that handle batteries in a daily basis. Besides this, it will be very difficult to standardize the batteries, so each EV car manufacturer will need to create its own battery swap net.
Great points. Swappable does sound really quick but the need for standardization seems to be a showstopper. If EV charging can come down to a 5-minute charge – even at 80% – that’s comparable to filling your petrol tank.
CHPT is the clear leader in the EV Charging Space by far. The stock has been treated like BLNK, EVGO which have very little revenues. CHPT at least has has revenue growth and it increased guidance 2X in the last year. Also CHPT things it will show some profits soon. CHPT should be higher than 14-15 Range.
Thank you for the comment Tom! We’ll look to do a company profile on ChargePoint soon.
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6 Electric Vehicle Charging Stocks For Green Investors – Nanalyze
Welcome to OurGlobal Community of Tech Investors
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- Haryana panel to examine EVs Policy 2022 – The Tribune India
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