ChargePoint (CHPT -4.54%) is at the forefront of the electric vehicle (EV) transition. It acts as something of a "picks and shovels" company, providing the charging locations that EV drivers use to keep their cars juiced up. If you're considering an investment, thinking that you want to get in on what amounts to a new type of fueling station, step back for a moment and consider these three facts.
1. ChargePoint stock is volatile
Over the past couple of weeks, ChargePoint shares have risen sharply. There's no company-specific news to point to for the move, but EV maker Tesla (NASDAQ: TSLA) reduced staff in its own charging network. That has some considering the possibility that the EV giant is planning to let other companies like ChargePoint build out the infrastructure needed to keep EVs rolling.
That could, indeed, be good news for ChargePoint, which is one of the companies constructing that network. Having less competition from Tesla would likely open up new opportunities for expansion. But don't let a few weeks of price movements blind you; ChargePoint stock is still a risky proposition. That's highlighted by the fact that the shares have fallen roughly 80% over the past year. And the stock is down more than 95% from its all-time highs.
Although some meme stocks seem to have regained traction again lately, if you buy ChargePoint, you need to understand that you are investing in a risky stock.
2. ChargePoint is spending a lot of money
The next big issue to consider is the opportunity ahead, which could be quite interesting as electric vehicles slowly displace internal combustion engine vehicles. ChargePoint has a diversified portfolio, with charging locations across North America and Europe. It also has multiple platforms for growth, from selling charging devices to offering charging subscription services. But there's one not-so-small fact to consider.
Building out the infrastructure to support a relatively new type of vehicle is costly. In fiscal 2024, research and development expenses totaled $220.8 million or so. Sales and marketing costs were about $150.2 million. And general and administrative costs -- basically, the expenses of overseeing the business -- came in at $109.1 million. All three were up year over year, with total operating expenses of $480 million or so versus revenue of $506 million. While the company ended the year with more cash than it had at the start, that was largely because it sold stock, diluting existing shareholders.
Normally companies don't issue shares when their stock has fallen so hard unless they absolutely have to. And, in the case of ChargePoint, it has to if it wants to keep building out its charging network. That's not likely to change anytime soon, with the company warning in its 10-K that "ChargePoint has experienced significant growth in recent periods in a rapidly evolving industry and expects to invest in growth for the foreseeable future."
3. ChargePoint is bleeding red ink
If you look closely at the revenue and expenses listed above, you will see that there's more revenue than operating expenses. There's a missing piece in between -- the cost of revenue -- which totaled $476.5 million in fiscal 2024. So the story is revenue of $506 million, from which you subtract the cost of revenue of $476.5 million, leaving gross profit at $30.1 million. From that figure you subtract operating expenses, or $480 million, leading to a huge full-year loss of $1.22 per share. In fiscal 2023, the loss was $1.02 per share, so things are going the wrong way.
CHPT Shares Outstanding data by YCharts
Don't expect the losses to change anytime soon. Once again, the 10-K is pretty clear: "ChargePoint operates in the early stage market of EV adoption and has a history of losses and negative cash flows from operating activities, and expects to incur significant expenses and continuing losses for the near term." If you are buying ChargePoint today, you are accepting that you will have to hold it through the ongoing build-out of its business and the red ink that effort is highly likely to create. Most investors will probably want to watch this company from the sidelines.
It could be winner, but there's a long road ahead
None of this is meant to suggest that ChargePoint won't eventually be a highly profitable company with an industry-leading position in the EV charging space. Right now, however, it seems highly unlikely that it's on the cusp of black ink. ChargePoint has too much spending ahead of it as it builds out its charging network and the losses are so deep it will take a huge directional change in its business to dig out from the red. Meanwhile, industry dynamics in an emerging sector will complicate the story, making an already volatile stock even more volatile. Unless you have a very bullish view of ChargePoint -- and a very strong stomach -- you should probably avoid the stock.
