ChargePoint Overhauls Management Team as It Looks to Rebound From Weak Near-Term Results

Equity Analyst

Brett Castelli

Revenue segments as reported by the company.

Networked charging systems

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ChargePoint is a leading provider of networked electric vehicle charging hardware and software. The EV charging industry consists of three broad categories of companies: hardware providers, integrators (software providers), and asset owners. ChargePoint focuses on providing integrated hardware and software product offerings and rarely owns assets. It pursues a closed-loop approach—only selling its hardware with its network software attached—which we view as unique among its peers.

ChargePoint’s founding vision was to be the leading provider of networked alternating current charging ports. The company has proved very successful in this pursuit, with approximately 50% AC market share. We view ChargePoint’s first-mover advantage—it was founded in 2007—and integrated hardware-software approach as contributing to its success in the AC market. Now ChargePoint seeks to aggressively expand beyond AC charging in North America.

Direct current charging—which allows for much faster refueling times compared with AC—is expected to grow at a faster rate than AC over the medium and long term. ChargePoint entered the DC charging market in recent years and expects an increasing contribution from sales of its DC products. We expect DC charging to represent a larger addressable market over the long term compared with AC, given much higher price points for hardware (greater than 10 times the price of AC), but we don’t foresee ChargePoint reaching similar levels of market share as it enjoys in AC.

In addition to public charging, ChargePoint competes in the private charging market, namely workplace and fleet. ChargePoint is the unquestioned market leader in workplace, given the prevalence of AC charging, while fleet is a newer market with many competitors seeking to gain a foothold.

Historically North America-focused, ChargePoint aggressively expanded its European presence via two acquisitions in 2021. The European charging market tends to be much more fragmented than the U.S.

Business Strategy & Outlook

We do not believe ChargePoint possesses an economic moat. We assess its moat across three verticals—residential, level 2 (AC), and fast-charging (DC)—and find varying degrees of moatiness across each vertical.

It is important to understand ChargePoint’s unique strategy to assess its moat. ChargePoint provides EV charging hardware and software to businesses and residential customers. In contrast to other hardware providers, ChargePoint only sells its hardware with its software, forming a closed-loop ecosystem. In addition, the company rarely owns assets, employing a capital-light model. Across the EV charging space, we see three broad categories of companies: hardware providers, integrators (software providers), and asset owners. We believe ChargePoint is the only provider at scale of an integrated hardware and software offering.

ChargePoint’s history is as a provider of networked AC hardware. We believe a combination of its first-mover advantage and business model—where it provides a bundled hardware plus software package—has created a moat around this segment based on switching costs. Given slower charging speeds compared with fast charging, AC charging is typically a cost center for the asset owner. Workplaces or retail stores may install AC charging as a benefit to employees or shoppers given the modest up-front cost—less than $5,000 per hardware port. Once installed, we view ChargePoint’s ongoing software revenue as very sticky, given that the asset owner would need to replace the hardware to replace the software. ChargePoint’s moat in the level 2 AC charging market is evidenced by its over 50% market share of all public AC ports, per the Alternative Fuels Data Center.

The DC charging landscape can be characterized by higher price points (approximately 10 times the cost of AC), more hardware-only providers, and less host ownership of assets. We think these characteristics, combined with less of a first-mover advantage for ChargePoint, lead to a more competitive landscape relative to the AC market. ChargePoint’s lower market share in DC supports our view that this segment lacks a moat. Per AFDC data, the company has approximately 10% market share of DC charging (20% excluding Tesla).

We do not believe ChargePoint’s residential EV charging product offering possesses a moat. In contrast to its business-to-business operations, ChargePoint does sell stand-alone hardware into the residential market, lowering switching costs. In addition, some auto original equipment manufacturers provide a compatible home charger, such as Tesla. We view the non-Tesla market share to be relatively fragmented with limited brand loyalty.

None

Economic Moat

ChargePoint Holdings

ChargePoint Holdings, Inc. operates as an electric vehicle charging network provider. It designs, develops and markets networked electric vehicle charging system infrastructure and its Cloud Services enable consumers the ability to locate, reserve, authenticate and transact electric vehicle charging sessions. The firm provides an open platform providing real-time information about charging sessions and control, support and management of the networked charging systems. This network provides multiple web-based portals for charging system owners, fleet managers, drivers and utilities. The company was founded in 2007 and is headquartered in Campbell, CA.

Earnings data Q4 2023

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CHPT's execution has worsened as inventories grow, gross margins suffer, and balance sheet deteriorates in FQ2'24. Linse Michael , a director in CHPT, has effectively liquidated 100% of his position, naturally raising further doubts about the company's prospects. While the management has guided a decent FY2024 revenue, while reiterating its CY2024 goal of "generating positive non-GAAP adjusted EBITDA,” the stock has unfortunately entered penny stock territory.

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News for ChargePoint Holdings Stock (CHPT)