Key points:
- Uncertainty, short-term downside and growing expenditure weigh on EV charging stocks
- EVgo expand Maryland fast charging network to Valley Park Commons in Hagerstown
- Whilst posting solid top-line growth, wide net losses are still present
Charging infrastructure is a rapidly expanding bi-product, or beneficiary, to surmounting EV adoption. This being said, it’s still an emerging market. Whilst it's easy to speculate on the long-term prospects of emerging markets, it's the short-term spending, uncertainty and exposure that often throws off early buyers. For EVgo (NASDAQ: EVGO), short-term share price volatility weighs on the opportunity for a low-risk EV charging play, leaving buyers dubiously questioning the long-term model; not helped by a wider rotation out of high-growth stocks.
The company has announced today that it is expanding its network in Maryland, installing a new EVgo fast charging station at Valley Park Commons in Hagerstown. This is the latest addition to the company’s collection of more than 850 public fast charging locations across the US, spread over more than 30 states. So, if EVgo is the largest EV charging network in the nation, then why is the EVGO share price just 2% above its IPO price?
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Firstly, although the company is expanding at a rapid rate, cash is being burnt at a parallel rate. Spending is weighing hugely on positive earnings, meaning that although EVgo’s last quarterly report showed revenue growth of over 69%, the company is still posting wide net losses – and this might not change any time soon.
The reality is, EVgo has some way to go; and it isn’t so much dependent on the company, but on the wider EV transition that is slowly gripping modern transport. The evolution is well underway, but we are still some time away from EV charging companies recording promising profits – hence the downside risk in the meantime.
This isn’t to say that EVgo isn’t a good play for EV infrastructure; the company estimates EV’s will grow by 40% in the next 10 years, meaning that the company still looks attractive on a longer term basis. Bearing in mind the downside exposure, lower entry points might be on the horizon. The question remains as to how EVgo chargers will fare against the broad range of Tesla superchargers and competition from Blink Charging and Chargepoint. Following the network expansion news this morning, EVgo stock currently trades at a gain of 1.5%, down 22% year-on-year.