Investors initially bought into the hype surrounding ChargePoint (NYSE: CHPT) and other charging infrastructure companies. It was a logical direction with the electric vehicle (EV) industry poised to boom in the coming years. In fact, some of the biggest concerns facing potential EV customers are range anxiety and charging infrastructure availability, problems ChargePoint can help solve.
Despite the growing EV market -- even if it's slower than anticipated -- ChargePoint has struggled to produce top-line growth for investors. But with a recent pivot from growth to profitability, can the company turn its business around and reward investors?
The bad news
One bad sign for the charging infrastructure start-up is that while many EV industry start-ups are facing brutal cash burn as they scale their business, fewer are posting revenue declines. ChargePoint's first quarter of fiscal year 2025 recorded an 18% decline in revenue, from the prior year's $130 million down to $107 million. Management also reduced second-quarter revenue guidance from a range of $150 million to $165 million down to a range between $108 million and $113 million.
Furthermore, the company ended Q1 fiscal 2025 with only $262 million in cash and cash equivalents, and it's already increased its shares outstanding by over 30% over the past three years. If it needs to raise more capital, investors could be further diluted.
With the broader EV market slowing down in the U.S., at least temporarily, ChargePoint will continue to struggle with revenue growth in the near term. But management is pivoting its strategy to focus on profitability, rather than on more expensive growth.
Software vs. hardware
More recently, management has decided to focus on its software development, which makes sense as it carries higher profit margins and recurring revenue. The company has announced several partnerships for its hardware to help bring products to market faster and more affordably.
One partnership that will help drive better results for ChargePoint is its agreement to jointly develop EV charging solutions with AcBel, a leading power supply manufacturer under Kinpo Group. This agreement should improve ChargePoint's research and development capabilities, reduce costs, and bring more innovative products and solutions to the market faster.
Another partnership that should move the needle for investors came with LG Electronics . The two companies are targeting commercial charging solutions, with deliveries expected to begin as soon as this summer. Essentially, the deal calls for ChargePoint to operate LG's charging stations with its software, and ChargePoint users will benefit from LG's high-quality EV chargers where the company doesn't currently offer hardware solutions.
Is the stock a buy?
ChargePoint stands to benefit with a new focus on software, thanks to its software-as-a-service (SaaS) for its commercial and fleet products. In fact, according to ChargePoint's investor presentation, the company works with 74% of Fortune 50 companies, and the revenue from its largest customers continues to grow organically.
Image source: ChargePoint investor presentation.
Lastly, with the pivot to software and profitability over growth, management expects to generate positive adjusted EBITDA in the fourth quarter of fiscal 2025. This would be a big step for the company toward proving to investors it has a long-term path to returning value to shareholders. For investors willing to accept risk that comes with a cash-burning start-up, ChargePoint is offering a cheaper entry point -- it's shed more than 90% of its value over the past three years -- to invest in an EV market that seems destined to continue growing .
Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
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