ChargePoint Shares Heading For $1 After Earnings Warning Drops Shares?

Last year was not a good one for Charging point (CHPT -2.29%) and it only got worse after the electric vehicle (EV) charging solutions company reported weak fiscal second-quarter results and moved its profitability forecasts.

With things looking dire for the company, let’s take a closer look at its results and see if the stock is heading towards $1 or seeing a rebound.

Declining revenues

Declining revenue has been a major issue for ChargePoint recently, with the company seeing a sizeable drop in revenue over the past four quarters.

For the second quarter of fiscal 2025, which ended July 31, its revenue fell 28% to $150.5 million. Revenue from grid charging systems was the biggest negative, falling 44% to $64.1 million. Subscription revenue, on the other hand, rose 21% to $30 million. The first is the charging hardware the company sells, while the second is a subscription the company sells that allows commercial and fleet customers to manage their charging stations, including pricing and management energy.

The company blamed a number of fleet deals that were delayed due to issues such as delayed permitting for missing the top end of its revenue guidance.

On the plus side, the company’s subscription revenue is at much higher margins, which has led to a nice improvement in gross margin. After paying a $28 million inventory impairment charge last year, gross margin would have increased from 19.3% (1% after tax) to 23.5%.

ChargePoint also trimmed its operating expenses nicely, reducing them by 29% to $88.3 million. Together, this helped the company reduce its losses as well.

The adjusted loss was halved from $86.1 million to $43 million, while its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved to a loss of $34.1 million compared to $81.2 million a year ago.

The company ended the quarter with $228.5 million in inventory, up from $198.6 million at the start of its fiscal year ended January. Given its steep decline in sales, this isn’t a great sign and could lead to further declines.

In the first six months of its fiscal year, ChargePoint posted operating cash outflows of $113.7 million and negative free cash flow of $121 million. It ended the period with $243.7 million in cash and equivalents and $285.7 million in debt.

To further improve its cost structure, the company announced that it will reduce its workforce by 15%. The reorganization is expected to result in $10 million in expenses, mostly from severance, but save the company $38 million to $41 million a year in operating expenses.

ChargePoint forecast fiscal third-quarter revenue to be between $85 million and $95 million, compared with the $110.3 million it generated a year ago. That would be about an 18% drop in the middle. Meanwhile, it pulled back its goal of positive adjusted EBITDA from this fiscal year (2025) to fiscal 2026. Management said it would need “moderate” revenue growth next year to meet that goal. Meanwhile, it said it is targeting significant cash flow in fiscal 2027.

Image source: Getty Images.

Is the stock headed for $1 or is this a buying opportunity?

ChargePoint is only down about 25% from hitting $1, so it certainly wouldn’t be a huge stretch to see the stock hit that price. However, despite the low stock price, the company still has a market cap of around $600 million.

The company is struggling mightily with the continued decline in revenue. Consumer interest in electric vehicles has definitely started to wane. While EV sales are still growing, growth slowed to 11% in Q2. However, this growth was helped by some strong discounting. If automakers can’t make a profit on EV sales, they will eventually move away from EVs and toward vehicles they can make a profit on.

Demand for hybrids, including plug-in hybrids, has grown strongly. However, regular hybrids use regenerative braking to charge and do not need charging equipment. This is the larger and faster growing part of the hybrid market.

In this context, it seems that companies are reluctant to invest heavily in charging infrastructure. Meanwhile, with sales expected to decline sharply for the fifth quarter in a row, it’s hard to trust ChargePoint at this point. While there are some positives, its declining sales along with negative cash flow and net debt on the balance sheet make an investment in the company a risky proposition. Right now, it seems like the company is more focused on surviving than thriving.

If the company delivers another weak earnings report, ChargePoint stock will likely head to $1.