An EVbox indoor charging station.
Courtesy EVBox
For investors with hardy constitutions, the recent plunge in SPAC prices has opened opportunities in a fast-growing sector: electric-vehicle charging companies.
Special purpose acquisition companies, and companies recently merged with SPACs, are getting crushed. Those losses are shaking investor confidence in many of the hot new technology start-ups—such as EV charging companies—which chose to go public by merging with a SPAC.
EV charging stocks are intriguing for three reasons. First, the stocks of the four main companies are down more than 43% from their 52-week highs, on average. Second, the business models are sound. And third, the government is coming to help.
President Joe Biden’s infrastructure plan contains roughly $300 billion for EVs in the form of purchase incentives, clean-energy infrastructure, and clean-energy manufacturing. Of course, the plan has to get passed, and the dollars have to get paid out.
Fortunately, the EV-charging sector has more going for it than just the American Jobs Act. The business model is, perhaps, the strongest reason to be bullish on the stocks. “Looking back to the days of Henry Ford, the gas stations are the ones that consistently made money, while hundreds of auto start-ups went out of business,” says Roth Capital analyst Craig Irwin.
There are more EVs coming. By 2030, if the car business hits projections, there will be roughly 15 million or more battery-powered EVs on U.S. roads, up from roughly 1.5 million today. Public EV chargers will get busier, and station economics will get better, as the utilization of EV “pumps” goes up.
The four main EV charging stocks come with slightly different investment angles.
ChargePoint Holdings (CHPT), the most valuable EV charging company by market cap, has already completed its SPAC merger and trades under its own name. Its stock is valued at about $6.8 billion, based on 305 million fully diluted shares outstanding and a recent price of $22.27.
The company has roughly a 70% market share of networked Level 2 charging in North America. Level 2 refers to a 240-volt plug, similar to the kind that is needed to run a large appliance at home. Level 3, or direct-current, charging is the fastest option.
ChargePoint doesn’t own the charging stations, but it provides the hardware and software. The company projects about $135 million in sales for 2021, growing to about $1.4 billion by 2025. It already has four ratings from Wall Street analysts, according to Bloomberg—all Buys. The average analyst price target is about $45.
Although ChargePoint sells Level 3 chargers, another company, EVgo, is aggressively building out its own network of fast-charging stations, which it will also operate. It boasts the largest network of Level 3 stations, with more than 800.
EVgo has an impressive list of partners helping build out its network, including Lyft (LYFT), General Motors (GM), and Tesla (TSLA). EVgo’s stock is worth $2.9 billion based on 363 million fully diluted shares outstanding when its merger with the Climate Change Crisis Real Impact SPAC (CLII) is wrapped up. EVgo projects it will generate $20 million in 2021 sales and about $600 million in sales by 2025.
No analysts cover EVgo or Climate Change yet. That’s not uncommon for companies that haven’t completed their SPAC mergers. That’s also the case for the third and fourth EV charging stocks.
Volta is merging with Tortoise Acquisition Corp II (SNPR). It envisions building charging stations on prime retail estate with partners, then generating sales from ads and direct payments from the retailers that benefit from EV drivers stopping and shopping.
Volta has about 1,500 charging ports and plans to generate about $47 million in sales in 2021. The company projects that will grow to about $800 million by 2025. The stock is valued at about $2 billion, based on 203 million fully diluted shares when the SPAC merger wraps up.
The final of the four EV charging options is EVbox, the largest charging-solutions company in Europe. Like ChargePoint, it produces equipment, and it has shipped 190,000 charging ports. It projects about $84 million in 2021 sales and about $450 million in 2023 sales. The company’s projections don’t go out to 2025. EVbox is merging with TPG Pace Beneficial Finance (TPGY). Its shares are valued at about $2 billion, based on 139 million fully diluted shares outstanding when the merger wraps up.
Of the four stocks, Barron’s likes EVbox best. It’s the least expensive of the group, and EVs are more popular in Europe than they are in the U.S. But cheapness isn’t always the best reason to buy a stock, and all four companies have potential.
The total market value of the EV charging stocks amounts to roughly $15 billion, a tiny fraction of the near-trillion-dollar market valuation of all the EV maker stocks combined. That seems like an anomaly.
If the auto makers deliver all the EVs projected—a necessary feat to justify all EV-related valuations—then there should be plenty of business, and profits, for the EV charging companies.
Read the rest of The Trader column: The Stock Market Climbed Because Tumbling Bond Yields Don’t Mean What They Used To
Write to Al Root at [email protected]
