ChargePoint (NYSE: CHPT) finds itself amidst the whirlwind of the electric vehicle (EV) revolution, akin to a steadfast “picks and shovels” firm, facilitating the infrastructure that fuels electric cars. For potential investors eyeing a stake in this novel fueling station domain, three pivotal facts demand scrutiny.

1. Buckle Up for Volatility in ChargePoint Stock

Recently, ChargePoint shares have undergone a meteoric ascent. While no company-specific development can be pinpointed as the catalyst, the strategic downsizing of employees in the EV manufacturer Tesla’s charging network has stirred speculation. Could this herald Tesla’s intentions to delegate infrastructure expansion to entities like ChargePoint? This shift might present fresh avenues for ChargePoint’s growth by reducing competition. Yet, the trajectory remains tumultuous; the stock has plunged roughly 80% in the past year, and over 95% from its peak.

CHPT data by YCharts

Partaking in ChargePoint means traversing a perilous investment terrain, akin to navigating the resurgence of certain meme stocks that exhibit capricious trajectories.

2. Capital Drain: The Costly Expansion Odyssey

ChargePoint’s potential lies in fostering the burgeoning age of electric vehicles that displace conventional internal combustion cars. With a robust presence in charging locations throughout North America and Europe, ChargePoint flaunts a varied growth strategy, spanning from charging device sales to subscription services. However, transformative progress incurs a hefty price.

The fiscal year 2024 witnessed soaring research and development costs, totaling about $220.8 million, coupled with marketing expenditures of roughly $150.2 million and administrative outlays nearing $109.1 million. Despite concluding the year with a raised capital pool—primarily through share issuances—there prevails a stark truth: the road to expansion is lined with escalating fiscal commitments, persisting into the foreseeable future.

CHPT data by YCharts

Share dilution signals a dire imperative for ChargePoint—expanding its charging network commands a continuous infusion of capital, entailing unabated shareholder dilution to perpetuate growth. This trajectory will likely persist, as signaled in ChargePoint’s 10-K statement, acknowledging, “ChargePoint has propelled substantial growth in a swiftly evolving industry and anticipates ongoing investments in expansion.”

3. Stranded in Red Seas: ChargePoint’s Ballooning Losses

Scrutinizing the revenue-expenditure spectrum reveals a stark narrative of persistent losses. Revenues of $506 million, counterpoised against $476.5 million in costs of revenue, yield a meager gross profit of $30.1 million. Once operating expenses of $480 million are deducted, a gaping full-year loss of $1.22 per share emerges, painting a bleaker picture than the preceding fiscal year’s loss of $1.02 per share.

CHPT Shares Outstanding data by YCharts

The cash-burning trajectory appears intransigent, as evidenced by the 10-K’s admonition: “ChargePoint operates in the nascent stages of EV adoption, marked by persistent losses and negative operational cash flows, and anticipates enduring losses and substantial expenses in the near term.” Embracing ChargePoint today implies embarking on a voyage through sustained operational build-out and the attendant red ink it seems destined to spawn. Hence, most discerning investors may opt to observe from a cautious distance.

Striving for Victory Amidst Perilous Pathways

None of the foregoing undermines ChargePoint’s eventual potential to metamorphose into a profitable juggernaut, wielding a preeminent position in the EV charging domain. Nonetheless, current indicators scarcely point to imminent profitability. The company faces an arduous ascent out of the abyss of deficit, exacerbated by industry vicissitudes in an emergent sector. This compounds the innate volatility of an already capricious stock. Unless armed with an unwavering bullish stance on ChargePoint and fortified nerves, prudent investors may heed to steer clear of this stock.

Should You Venture $1,000 into ChargePoint’s Turbulent Waters?

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