I’ve been all over the map on ChargePoint Holdings (NYSE:CHPT). And by extension I’ve been alternately bullish and bearish on CHPT stock. The simple reality is that, as I’ve mentioned before that I hail from small town USA. I don’t say that to make myself part of the story. I mention it because, with the exception of the occasional Tesla (NASDAQ:TSLA), we don’t have a widely built-out electric vehicle (EV) infrastructure.
However I realize I’m not alone. And that’s a big part of the bullish case for CHPT stock. For widespread electric vehicle adoption to occur, there has to be a much larger charging infrastructure. And ChargePoint is the leader in the charging space and by a large margin.
But like many stocks that begin to trade publicly, CHPT stock has gone through some volatile price discovery. However, it’s beginning to look like investors are coming to an agreement. And that means they can start looking for reasons to buy.
Range Anxiety is a Real Concern
So why be Dr. Obvious? Because range anxiety is perhaps a bigger obstacle to widespread EV adoption than even the price tag. Allow me to explain.
When my kids were much younger, long trips were not uncommon. And on those trips, stopping for gas resembled a pit stop at an auto race. The goal was to get the vehicle refueled and get to where we needed to go as soon as possible.
If you are a parent with young children, I hope you can relate to that example. Having a charging infrastructure is the first step. But it’s only the first step. For trips of significant length, there is going to have to be a way to get a vehicle partially refueled as quickly as possible.
Albeit making a slightly different point, my InvestorPlace colleague Josh Enomoto provided this insight, “…I’m not sure if they’ll (consumers) get accustomed to waiting between half an hour and several hours for a “refuel.”
The solution, in part, is high-speed charging. And as I pointed out in a previous article, ChargePoint may be able to reconfigure its existing stations with its new Express Plus, 500-volt charging stations.
Recent Partnerships Prove Leadership
Investors have been bullish on CHPT stock largely for their leadership position. One way that leadership manifests itself is in the partnerships the company has been able to cultivate. Recently, ChargePoint inked a partnership with Mercedes-Benz. The initiative is called “me Charge” and it will give Mercedes EV drivers access to a “frictionless cross-platform charging experience.”
A second partnership is the launch of a global portfolio of solution to meet the needs of commercial fleets. Many of the EV companies that have gone public recently are focusing on the commercial sector and with good reason. Fleets are projected to make up 50% of the global auto fleet with an assumed 40%-50% CAGR in the next 20 years.
But I believe investors should also keep their eyes on the hospitality industry. ChargePoint is currently doing business with several major hotel chains including Marriott International (NASDAQ:MAR) and Hyatt Hotels (NYSE:H) with a focus on its charging-as-a-service (CaaS) model. Going back to my traveling example, having a network of charging stations readily available at hotel chains could provide customers with that all-important “reason beyond price” to choose their properties.
Floor on CHPT Stock Is Holding for Now
In early June, I felt ChargePoint was a cautious buy because it appeared the stock had found a floor. A little over a month later, that narrative is holding. Better still, the floor seems to be rising. And you can see that as the CHPT 50-day simple moving average (SMA) is getting closer to a bullish crossover of the 200-day SMA.
This is a narrative that is supported by analysts. Currently, the lowest price target for CHPT stock among the eight analysts that rate the stock is $28. That’s just a shade under where the stock is as of this writing (it closed at $28.84).
There will be a risk premium in the EV industry for some time to come. There’s still too much that we don’t know. And with more competitors going public, there will be other options for investors to choose from. Will Ashworth suggests the Invesco WilderHill Clean Energy ETF (NYSEARCA:PBW) for risk-averse investors. But if you have a tolerance for speculation and risk, putting money that you won’t miss into a stock that’s a leader in its sector and on the rise isn’t a bad way to go.
Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.
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