Chargepoint (SBE): Potential Exponential Growth Analysis

9 Nov 2020

ChargePoint, an electric vehicle charging network, has struck a deal to merge with a SPAC (Special Purpose Acquisition Company), Switchback Energy Acquisition Corporation (SBE), with a market valuation of $2.4 billion.

In this analysis, I'll be going over the company's business model and financials, as well as technical analysis of the very short price action history we have available.

What is Chargepoint?
- Founded in 2007, ChargePoint has built one of the world’s leading electric vehicle (EV) charging networks
- The company delivers a fully integrated EV charging solution, with a comprehensive portfolio of hardware, software and services
- It recently received an enterprise value of 2.4b.
- Essentially, while companies like Tesla (TSLA) and Nio (NIO) compete for dominance in the EV market share, Chargepoint (SBE) offers the infrastructure necessary for all EVs.

Market Outlook
- EVs are projected to consist 9.9% of all new vehicles sold in 2025 and 29.2% in 2030 in the U.S. and Europe.
- The trend is definitely green, especially with Biden essentially having been elected as president recently.
- In the market of Network L2 Charging, Chargepoint takes up 73% of the market share, 7x more than its closest competitor.
- I always emphasize the importance of choosing the number 1 stock in the industry or field, and Checkpoint qualifies.

Financials
- Chargepoint demonstrated good revenue growth until this year
- It did 666M in 2017, 992M in 2018, and 147m in 2019.
- However, due to the Corona virus pandemic (Covid-19), the expected revenue for this year is at 135m.
- Nonetheless, the company has very bold goals as it seeks to reach a 22B revenue target by 2026.
- This would indicate a 40% compound growth rate per year over the next 6 years.
- While they are still at a net loss, Chargepoint is currently sitting on 648m of cash, so their cumulative net loss of 347m can easily be covered.
- By 2026, which is when the 22B revenue target is hit, we could see the company reach net profit
- Their gross margins have been deteriorating due to massive expansion and scalability of infrastructure around the world.
- However, it's important to understand that these are one time costs, and we could expect Chargepoint's gross margin to grow from 13% in 2019, to 42% by 2026.

Technical Analysis
- Because Chargepoint was listed through a SPAC recently, it does not have much price action data to be analyzed.
- Based on the hourly chart, we can see that prices are ranging in a slow uptrend, forming higher lows and higher highs
- It's trading within an ascending parallel channel, in an extremely choppy range
- There are currently three key levels of support on the hourly, formed through gaps

Summary
This company's fundamentals for the long term appears extremely solid. It has high growth potential, dominant market share, and is part of a megatrend industry of EV infrastructures. We would have to see whether the company delivers, according to their IR deck, but the overall outlook remains very bullish.

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