What Happened?
Shares of EV charging solutions provider ChargePoint Holdings (NYSE:CHPT) jumped 22.1% in the afternoon session after the company reported strong third-quarter results that exceeded analysts' revenue and EBITDA estimates. While sales declined year on year in the Networked charging systems business, the result came in well ahead of consensus estimates, indicating expectations were modest heading into earnings. However, the top line also benefited from strong double-digit growth in the subscription segment, which is more promising.
On the other hand, its full-year operating income guidance was lowered, showing that the growth is less profitable than expected. The market seems to be focusing more on the top-line successes, and the stock is up as a result.
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What The Market Is Telling Us
ChargePoint’s shares are extremely volatile and have had 83 moves greater than 5% over the last year. But moves this big are rare even for ChargePoint and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 19.9% on the news that the company reported second-quarter earnings results, with revenue and EPS missing analysts' expectations. Notably, revenue fell 28% y/y due to lower hardware sales. The weakness was concentrated in the network charging systems segment. The company observed delays in fleet deals due to permitting and construction challenges.
On the other hand, the subscription segment did the bulk of the heavy lifting during the quarter, with sales up 21% y/y. Moving on to profitability ratios, while gross margin ticked up slightly, the company recorded operating losses and cash burn. To stem the decline, the company highlighted cost cutting measures and noted that the quarter represents "the bottom of the trough" for revenue growth and EBITDA loss, and expects to be adjusted EBITDA positive by FY'26. Regardless, inventory levels are expected to remain elevated through the end of the year but may begin decreasing around Q1 or Q2 due to challenging macro conditions.
Looking ahead, it wasn't a surprise that its sales outlook for the next quarter fell short, with the outlook provided by management factoring in the highlighted macro concerns.
Overall, this quarter could have been better, and the stock's reaction suggests markets are likely not convinced about the near-term outlook.
ChargePoint is down 33.6% since the beginning of the year, and at $1.45 per share, it is trading 50.2% below its 52-week high of $2.90 from December 2023. Investors who bought $1,000 worth of ChargePoint’s shares 5 years ago would now be looking at an investment worth $146.99.
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