00:00 As the world transitions to electric vehicles, electric charging company Chargepoint is showing
00:05 rapid growth. Revenue increased 97% in 2022 and is now almost 10 times higher than in
00:11 2018. The business is currently valued at $3 billion, with $283 million of cash and
00:18 $295 million of debt the enterprise value is roughly the same.
00:22 But the company is not yet profitable. Chargepoint has made a loss of $337 million over the last
00:28 12 months and has reported negative free cash flow to the tune of $322 million. Furthermore,
00:34 stock based compensation at $102 million is roughly 20% of revenue.
00:39 Chargepoint makes money in three main ways. Hardware sales makes up 73% of revenue, cloud
00:45 services contributes 19% and maintenance services adds up to 8%. The company is expanding in
00:51 Europe and gross margins which dipped to 18% last year have recovered to over 20%. With
00:57 more than 240,000 ports, Chargepoint is now the leading electric vehicle charging network.
01:02 But Chargepoint is operating in a competitive and difficult industry. Its main competitors
01:07 include Blink, EVgo, Electrify America and Tesla. Although Tesla has fewer charging stations,
01:14 its DC chargers are considerably faster and more reliable than Chargepoint's AC chargers.
01:19 And partly in response to government funding, Tesla recently made its supercharger network
01:24 available to vehicles from Ford, General Motors, Volvo, Rivian. More partnerships are highly
01:30 likely. That said, Chargepoint's AC chargers are
01:33 cheaper and they're perfectly suitable for charging vehicles at parking lots and other
01:37 longer term stays. A bigger problem for Chargepoint is its hardware based business model which
01:42 is notoriously low margin and subject to commoditization. Even high growth markets can see a race to
01:48 the bottom in hardware that can lead to razor thin profit margins. This can be partly seen
01:53 in Chargepoint's negative operating margin of 64%. For every $1 in revenue, they're
01:59 losing 64 cents. Considering the recent cash burn and the amount of cash on the balance
02:03 sheet, Chargepoint will need to raise more funds to stay in operation.
02:07 And Chargepoint doesn't seem to be providing a high level of service. One study found that
02:12 36.4% of its charging stations were non-functioning, much higher than competitors. Compare that
02:19 to Tesla which claims its superchargers have an uptime of more than 99%.
02:24 Slow and unreliable charging is a major frustration for EV owners and that could damage the Chargepoint
02:30 brand. Meanwhile, the company needs to stay on top of rapid technological change as batteries
02:35 and charging solutions are bound to keep developing over the next few years. For all these reasons,
02:41 I think it's best to avoid this stock and I give it a negative rating but these are
02:45 my personal opinions, not financial advice and I've got no position in Chargepoint.
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