On Thursday, Needham maintained a Hold rating on ChargePoint (NYSE:CHPT) Holdings Inc. (NYSE: CHPT), following the company's third-quarter results. Trading at $1.22, the stock has declined nearly 48% year-to-date. ChargePoint surpassed third-quarter revenue expectations, which had been set low due to a restructuring of its sales and marketing efforts.
According to InvestingPro data, the company's revenue declined by 21% in the last twelve months, with particularly weak gross profit margins of 11%. The analyst pointed out that the company's fourth-quarter revenue guidance aligns with consensus estimates, marking a shift from its recent history and supporting management's statements about a bottoming out in charging equipment demand and growing customer momentum.
The analyst noted that while electric vehicle (EV) adoption rates are likely to encounter stronger headwinds with the new administration, EV adoption has so far outpaced the growth of charging equipment, leading to increased utilization for ChargePoint's existing infrastructure.
Despite this positive trend, the firm remains cautious due to the high levels of inventory, which pose a risk in the context of an uncertain recovery in industry demand. InvestingPro analysis reveals the company is quickly burning through cash, with negative free cash flow of $269 million in the last twelve months.
ChargePoint's stock is considered fairly valued by Needham, trading at approximately 10 times the firm's updated fiscal year 2028 adjusted EBITDA, which has been discounted back. Based on InvestingPro's Fair Value analysis, the stock appears slightly undervalued at current levels.
The analyst's comments suggest a cautious outlook on the stock, acknowledging both the positive developments in the company's quarterly performance and the broader challenges that may affect its future growth and demand for its products. Subscribers to InvestingPro can access 12 additional key insights about ChargePoint, along with comprehensive financial health scores and detailed valuation metrics in the Pro Research Report.
The reiteration of the Hold rating comes after ChargePoint reported a better-than-expected performance in the third quarter and provided guidance for the fourth quarter that met analysts' predictions.
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