EVgo (NASDAQ: EVGO) is a leading provider of electric vehicle charging stations with over 800 across the United States that produce 100% renewable electricity. Because of EVgo’s mission to provide electric charging stations, they are positioned to take advantage of the explosive growth in the electric vehicle industry as many individuals look at purchasing an EV as their next vehicle.
Recently, EVgo reported its third-quarter results which pleasantly surprised investors, this lead to a surging EVgo stock price, pushing its market capitalization to over $4 billion. This would be the second time we’ve seen widespread excitement in EV-related stocks following the start of the hype in 2020 with Tesla. In this article we will breakdown everything investors need to know about the EVgo Stock Forecast for 2021 and beyond.
EVgo’s Recent Quarter surprises investors
In EVgo’s latest quarterly results, they managed to grow revenues by 29% quarter-over-quarter, providing close to $6.2 million in revenue. This was the result of an expanding customer base, growing over 36,000 alone this quarter, to over 310,000 total customers.
With EVgo’s vastly growing business, gross margins have also grown substantially. Currently, EVgo’s adjusted gross margin is upwards of 22%. This fundamental will be a massive component to focus on moving forward as they expand the charging network and strive for profitability.
The Infrastructure Bill to re-shape energy consumption in North America
Since the Infrastructure Bill has now passed, major incentives are being put towards Electric Vehicles and charging stations. The ultimate goal of this bill is to move the United States towards a future of renewable energy. This however would have taken much longer without added support.
The bill will dramatically increase the number of electric vehicles on the road as charging stations are built to accommodate those vehicles with a dedicated $7.5 billion towards charging station infrastructure. Roughly 500,000 chargers will be built in the United States.
With increased infrastructure, more consumers will be comfortable with switching to electric vehicles, which will naturally increase the demand of EVgo charging stations, resulting in potentially higher revenue and profitability over the next decade.
Furthermore, by 2025 the forecasted EV charging station market value will exceed $72.5 Billion according to a recent study. Over the next 4 years, this market is expected to grow at a compound rate of 38.5%. The strong tailwinds ahead play a huge role in the EVgo Stock Forecast over the next few years.
Valuation concerns and growing competition – EVgo Stock Forecast
Despite the phenomenal growth ahead for EVgo’s business, the stock valuation neared all time highs last week as the wider EV market rallied. This rally saw the companies Price/Sales ratio skyrocket which can be an indication that the asset is overvalued. However, since last week the share price has fallen to $14.72 and represents a price to sales ratio of 52.46x.
Still, it remains an important component that investors need to be aware of, as the market tends to price in future events quickly (eg. Infrasture Bill). EVgo will continue to battle for marketshare in the charging industry, with some companies such as Volta (NASDAQ:VLTA) offering free charging to customers for the first 30 mins. The company generates revenue through advertisement which is likely to attract marketshare as they expand.
The big player in the EV charging game is ChargePoint (NASDAQ:CHPT), who currently have the largest charging infrastructure with over 20,000 charging locations. To date, ChargePoint currently holds 7x more marketshare in networked level 2 charging than any other competitor in the United States.
Lastly, another competitor for EVgo is Tesla (NASDAQ:TSLA), which many are unaware of. Tesla currently has a worldwide supercharger network of over 25,000. Tesla has made promises to grow this network even further over time. The catch is, this remains strictly for Tesla customers, but that may change as time progresses.
Wallstreet lowers valuation after EVgo stock rally
Following EVgo’s rally last week, Wallstreet issued some concerns regarding new entrants into the EV charging space. Maheep Mandloi, analyst from Credit Suisse recently lowered the firms rating to Neutral from Outperform on EVgo stock. Mandloi noted that the recent EVgo stock rally “appears to have priced in the benefits of the infrastructure bill”. Furthermore, the analyst noted EVgo faces potential competition from new entrants in a capital intensive industry according to theFly. Nevertheless, the analysts $17 target currently represents a 16.4% upside from the EVgo stock price.
Another analyst, Ryan Greenwald from the Bank of America downgraded EVgo stock to Underperform. The analyst noted that the lock-up agreement on more than 70% of EVgo shares outstanding expires at the end of the year. The point Greenwald brings up is important for a few reasons. For newer investors, EVgo went public back in July and any company that goes public via an IPO has a lock-up period on insider shares. Once this lockup expires, insiders can sell these shares and this increases the supply of EVgo shares available to general shareholders.
For example, when the final lock-up of ChargePoint shares expired on September 28, roughly 74 million additional shares become available for trading. Between September 28 and October 4, the Chargepoint stock price dropped by 13%. The lock-up period is standard procedure for IPO’s but the expiration of locked-up shares is always something investors should be mindful of.
Final Thoughts – EVgo Stock Forecast
Overall, while EVgo does seem to be growing quite fast as the EV industry continues to expand at a record rate, the valuation concerns remain. As pointed out by Maheep Mandloi, while the infrastructure bill is a catalyst, the market tends to price in these events quickly. However, the analysts coverage came as the stock was nearing $20 a share and Credit Suisse’s valuation now implies a 16.4% upside.
The EV charging market will continue to heat up and EVgo still has the title of first mover advantage alongside a handful of other competitors. Investors will be watching closely as we move into 2022 and the infrastructure bill is rolled out across the country.
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The content above is strictly for informational purposes only and is not financial advice nor does it constitute a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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