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.
Furthermore, EVGO has seemed to wither a wider market sell off so far with the stock up 22% this month. Why is the stock fairing so well in a turmoiled market? This article will breakdown everything investors need to know about the EVGO Stock Forecast.
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 in November. This rally saw the companies Price/Sales ratio skyrocket which can be an indication that the asset is overvalued. However, since then the share price has fallen to the $11 mark alongside its competitor ChargePoint who has fallen to similar levels.
Still, valuation 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. Volta 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
In late January, JPMorgan analyst Bill Peterson lowered the firm’s price target on EVgo to $14 from $20 but maintained a bullish view on the stock with an Overweight rating. The analysts lowered target is said to reflect near-term electric vehicle adoption trends, supply constraints and revised revenue/earnings outlook over the mid term.
However, Peterson believes the company’s long-term outlook remains positive and continues to see “significant upside for patient investors.”
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 wider market concerns regarding slower growth for tech companies in 2022 continue to effect investor sentiment.
The EV charging market will continue to heat up and EVgo still has the title as a first mover alongside a handful of other competitors eg. ChargePoint and Volta. Investors will be watching closely as we move closer to the companies Q4 results, as this earnings season has been unforgiving to say the least.
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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.