These should be the best of times for ChargePoint Holdings (NASDAQ:CHPT) stock. They’re the worst of times. Shares are down 81% this year because, while revenue is increasing, the company isn’t making any money.
For the three months ending in July, ChargePoint lost $125 million and only brought in brought in, which was $150 million. It burned through $190 million in cash and ended the quarter with $233 million of it. It’s having to raise more, watering down existing stockholders. This company should have worked. Investors need to ask why it didn’t.
ChargePoint Sells a Product
ChargePoint saw itself as a product company. It makes chargers, which convert AC power into the DC power used by a car, most support 240 volts of power or less. That’s the draw of your home washing machine.
ChargePoint had a “standard” it called DC Fast for 480 volt chargers. It lost that race to Tesla (NASDAQ:TSLA), whose plugs are now the industry standard. ChargePoint had to write off $28 million of inventory just in the second quarter.
Instead of building a public charging network, ChargePoint focused on selling directly to fleet customers. It claims to have delivered 188,000 chargers and serve 75% of the Fortune 50. But ChargePoint “subscription revenue” was just $30 million in the second quarter. Once a charger is sold, it’s forgotten.
ChargePoint will argue that a “service” business model wouldn’t work either. Rival EVgo (NASDAQ:EVGO), which manages as well as installs chargers, also lost money in its most recent quarter. CHPT stock is down 71% this year.
Fill ‘Er Up
The problem is simple. ChargePoint has yet to master the fill-up experience.
Filling a car with gas takes 5 minutes, anyone can do it and you don’t even have to go inside a store. Filling a car with electricity takes much, much longer, about a half-hour. For most EVs, that delivers 200 miles of range, or three hours of driving. How would you like to stop a half-hour for every three hours of driving on your next road trip? And what would you do in the meantime?
A year ago, General Motors (NYSE:GM) and EVgo tried to answer that question through a deal with Pilot Flying J, the truck stop chain controlled by Berkshire-Hathaway (NYSE:BRK-A, NYSE:BRK-B). That’s now being rolled out, with your tax dollars working on it.
But you can’t just install a charger at a gas station and walk away. It has to be serviced. Customers need something to do with their time.
Buc-ees, the fast-growing Texas chain of super-sized gas stations, is now supporting Tesla chargers at some locations. You still have the problem of monitoring that charge. How do you know when your car is full? Unless someone is there, chargers can be filled with fully charged cars and new customers can’t get in.
The Bottom Line on CHPT Stock
ChargePoint sees EV charging as a product.It’s a service. That’s why I’m not buying the stock, even at current levels.
The service isn’t delivering electricity. It’s delivering the experience of getting a fill-up and getting on your way.
EVs work great in town. Utility companies, which make their money off the electricity, sell ChargePoint Level 2 chargers for about $550. But if I’m going to commit half a year’s income to a car I’m going to want to go anywhere, and know I won’t have a refueling problem.
What the EV needs are true electric service stations to provide that experience. ChargePoint doesn’t do that. That’s why ChargePoint, its rivals, and the whole industry is in trouble right now.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
