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As the global transition towards electric vehicles (EVs) continues, the spotlight on EV-charging infrastructure and associated stocks has never been brighter. With the automotive industry undergoing a monumental shift towards sustainability, investors are increasingly turning their attention to companies driving the EV revolution. EV-charging stocks, in particular, have emerged as a pivotal segment within this burgeoning market, offering promising investment opportunities amid the electrification wave.
In this article, we turn our focus to EVgo (EVGO), a prominent player in the electric vehicle charging industry. With analysts forecasting a doubling of its stock value, EVGO stands out as a compelling candidate in the rapidly evolving EV market. Let’s explore the factors driving this bullish outlook by examining the company’s financials, recent insider transactions, analysts’ actions, valuation and growth potential, and sentiment in the options market.
About EVgo Stock
Founded in 2010 and based in Los Angeles, EVgo (EVGO) owns and operates a fast-charging network for electric vehicles across the United States. The company constructs and manages the necessary infrastructure and tools to accelerate the widespread adoption of electric vehicles among individual drivers, rideshare services, commercial fleets, and businesses. Valued at $646.4 million by market cap, it boasts one of the largest public fast-charging networks in the country, encompassing over 1,000 fast-charging sites spread across more than 35 states.
Shares of EVgo have gained about 15.6% over the past month, but remain down 40% on a year-to-date basis.
Recent News for EVGO Stock
On May 29, Toyota Motor North America announced that the Baldwin Park and Sacramento areas in California would be the inaugural recipients of EVgo DC fast chargers. Toyota and EVgo plan to have these fast chargers operational next year.
On May 21, EVgo revealed that its nationwide registered customer accounts surpassed the 1 million mark. The surge in EVgo customer accounts has been remarkable, soaring by 400% since April 2020, reflecting growing EV adoption rates in the U.S. as well as increased demand for public charging infrastructure.
On May 14, EVgo announced its plan to start installing North American Charging Standard (NACS) connectors, which are in the process of standardization as SAE J3400, across its fast charging network later this year. As part of its commitment to serve all electric vehicles, stations included in the rollout will cater to both CCS and NACS vehicles. The company will initiate deployments in primary markets with significant NACS vehicle penetration, allowing it to maximize charger usage.
EVgo CEO Makes $250K Bet on the Stock
On May 14, Evgo shares surged more than 16% following the announcement that its Chief Executive Officer and Director acquired a solid stake in the company. In a regulatory filing, EVgo disclosed that CEO and Director Badar Khan bought 125K shares of Class A common stock on May 13 at a weighted average price of $2.006, totaling a transaction size of $250,750.
This insider buying by the CEO demonstrates a significant investment in EVgo, indicating confidence in the company’s future prospects. Khan currently owns 175,230 shares of the company, representing 0.1649% of the total outstanding shares.
Analysts Are Becoming Increasingly Bullish on EVgo
On June 5, Benchmark analyst Michael Legg initiated coverage on EVgo with a “Buy” rating and a price target of $3. The analyst foresees ongoing financial improvement throughout 2024, with 2025 projected as a breakthrough year as the company attains positive EBITDA by the end of the year.
According to the analyst’s perspective, EVgo’s business model might emerge as a long-term recurring cash machine. As per the analyst, the $3 price target is warranted by EVgo's strategic position in DC fast charging and its emerging market leadership.
Additionally, on May 9, Cantor Fitzgerald upgraded the stock to “Overweight” from “Neutral,” with a price target of $4. The firm upgraded the shares primarily based on valuation, citing a notable underperformance since the beginning of the year. Cantor Fitzgerald analyst also characterized EVgo’s Q1 results and full-year guidance as “encouraging.”
How Did EVgo Perform in Q1?
EVgo released its most recent quarterly earnings report on May 7. In the first quarter of 2024, the company’s revenue surged 118% year-over-year to a record figure of $55.2 million, primarily fueled by growth in charging revenues and eXtend revenue, exceeding Wall Street’s projections by $1.85 million.
Notably, EVgo's revenue has surged more than 1,000% since FY20, soaring from $14.6 million to $161 million in the fiscal year ending 2023, primarily driven by the electric vehicle revolution. The company also reported a gross profit of $6.8 million for the quarter, with the gross margin climbing to 12.4% from 0.2% a year ago.
EVgo’s first-quarter net loss narrowed to $28.2 million, or $0.09 per share, compared to $49.1 million, or $0.18 per share, in the corresponding period last year. The bottom-line beat was propelled by positive changes in the fair values of warrant and earnout liabilities, heightened gross profit, and decreased general and administrative expenses. Its EPS also topped analysts’ expectations by $0.05.
Moreover, EVgo’s network throughput surged in Q1, surpassing 53 gigawatt-hours and nearly tripling year-over-year, which was attributed to various factors - such as ongoing EV adoption, a transition among EV buyers from early to mass adopters with a higher proportion residing in multi-unit dwellings, an increase in EV vehicle miles traveled, rapid expansion in rideshare, and the emergence of less efficient EV models.
During the first quarter, the company saw a significant uptick in new customer accounts, with nearly 109,000 additions, marking a 63% year-over-year surge and bringing the total to over 981,000 by quarter-end, highlighting the quality of the EVgo network. Its scale and position among customers provide a competitive advantage, enabling it to target and attract higher-value retail customers while also enhancing the value of existing customer relationships.
In summary, EVgo’s performance in Q1 demonstrates a company progressing along a clear growth trajectory, marked by significant improvements in revenue and operational metrics.
Management also reaffirmed its full-year guidance. Total revenue is expected to be between $220 million and $270 million, while adjusted EBITDA is forecast to range between negative $48 million and negative $30 million. Moreover, EVgo’s CEO, Badar Khan, expressed confidence that the tailwind of long-term EV adoption will enable the company to “achieve adjusted EBITDA breakeven in 2025 and create substantial shareholder value.”
Analysts tracking EVgo anticipate the company’s net loss to narrow year-over-year to $0.38 per share in fiscal 2024. Additionally, analysts anticipate EVGO’s full-year revenue to increase by 54.43% year-over-year to $248.55 million.
EVGO Stock Valuation
Assessing EVgo’s valuation, its forward price-to-book ratio sits at 0.40x, significantly lower than the sector median of 2.40x, suggesting that the stock is somewhat undervalued and is presently trading at a discount relative to its assets.
Also, the stock is trading at 0.91 times forward sales, roughly in line with the sector median of 0.86x.
Options Market Sentiment on EVgo Stock
Looking at the July 19, 2024, option chain, we see a bid/ask for the $2.00 CALL option of $0.30/$0.40, and a bid/ask for the $2.00 PUT option of $0.15/$0.25. Remember, we're looking at the options strike closest to the current stock price. We can calculate the expected price move using the mid prices of these options:
0.35 (2.00 Call) + 0.20 (2.00 Put) = 0.55/2.15 = 25.5%
As shown above, the options pricing suggests a potential movement of approximately 26% up or down by the July expirations from the $2.00 strike price when employing the long straddle strategy. That would place the stock in a trading range of $1.59 to $2.69 by the expiration date.
Furthermore, calls at the $2.00 strike price outnumber put options by a ratio of about 3 to 1, with 304 open calls compared to 98 open puts, signaling a bullish sentiment in the options market and suggesting a greater probability of the stock rising.
What Do Analysts Expect For EVGO Stock?
EVgo stock has a consensus “Moderate Buy” rating. Out of the 11 analysts covering the stock, five recommend a “Strong Buy,” one suggests a “Moderate Buy,” and the remaining five give a “Hold” rating. The mean target price for EVGO stock is $4.43, indicating an upside potential of 106% from the current price.
