Some financial traders are curious about EVgo (NASDAQ:EVGO) stock because they envision a strong future for the electric vehicle charging market.
That’s understandable, but EVGO stock only earns a “D” grade because EVgo’s bottom-line results are highly problematic.
This doesn’t mean that EVgo is completely hopeless. We’re not assigning the shares an “F” grade, as EVgo could deliver value to the shareholders over the coming quarters.
Still, prospective investors should be cautious and selective, and ought to be aware of EVgo’s major risks.
EVGO Stock Rises and Falls, Again and Again
The first thing to know is that EVGO has a history of popping and then pulling the rug on EVgo’s unfortunate long-term investors. The shares have risen to peaks of $22, $19, $12, $8 and more recently, $5.50. Today, though, it trades at around $4.15.
All of those stock-price rallies were followed by disheartening selloffs. As the old saying goes, “This time it’s different” are the unsuccessful trader’s last words.
Don’t get the wrong idea here. EVgo has the potential to grow as a business venture, especially since the company has formed some notable partnerships and expanded its charging-station network.
On the other hand, EVgo has reportedly opted to ban the use of third-party adapters (i.e., ones not made by automakers). EVgo cited safety concerns for this decision, but it may complicate the company’s business operations.
EVgo Loses Its Mojo
Just a month ago, EVGO stock embarked on another one of its short-lived rallies. This time, it was based on EVgo’s second-quarter 2023 results, which were well-received for a hot minute.
The market’s enthusiasm for EVgo was “transitory,” to borrow a phrase from the Federal Reserve. It’s great that EVgo grew its revenue 457% year-over-year to $50.55 million. That’s not the full story, though.
As usual, the devil is in the details. EVgo’s cost of revenue grew even faster than the company’s revenue, believe it or not. Specifically, the company’s cost of revenue soared 560% year-over-year to $37.74 million.
It only gets worse from there. In 2023’s second quarter, EVgo reported a $21.54 million net earnings loss. That’s quite a fall-off, compared to the company’s net income of $17 million from the year-earlier quarter.
Financially speaking, EVgo is losing its mojo and the company should publish a specific action plan to reduce its expenditures. Otherwise, EVgo might create a fiscal sinkhole that it can’t get out of.
EVGO Stock: No Need to Take a Position Now
EVgo’s investors won’t literally get electrocuted, of course. However, it might shock them to find out that EVgo’s expenditures are outpacing the company’s revenues.
The future of the EV charging market seems promising. Moreover, EVgo’s partnerships and expanding charging-station network are notable.
Yet, EVgo’s prospective investors should pay close attention to the company’s financial risks. Hopefully, the company will soon produce a cost-cutting action plan. For now, however, EVGO stock gets a “D” grade as it’s vulnerable to further drawdowns.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
