ChargePoint Holdings Inc. witnessed a substantial drop in revenue, primarily attributed to the US auto strike, yet investor focus on the electric car charging network company’s long-term potential led to a significant rally, pushing share prices to a three-week high. Despite reporting a 12% decline in third-quarter revenue to $110.3 million, ChargePoint’s shares surged as much as 12% on Thursday, marking the most intraday gains since November 14. As of 12:20 p.m. in New York, the shares were up 10.2% at $2.26.
Analysts expressed growth concerns, leading to downgrades and reduced price targets for the company on Thursday. B Riley Securities downgraded ChargePoint from buy to neutral and cut its 12-month price target by half to $2.50. Despite these adjustments, some research firms highlighted ChargePoint’s growth outlook.
Evercore ISI, with a $6 target, noted that ChargePoint “still has several levers to improve gross margins” and emphasized its favorable positioning in an industry with long-term growth potential. The positive sentiments regarding ChargePoint’s future contributed to the stock’s resilience despite the revenue challenges.
If ChargePoint’s rally continues, it could activate options equivalent to over 12 million shares. Notably, there are more than 120,000 outstanding contracts of $2.50 call options expiring Friday, each granting the owner the right to buy 100 shares at that price. Although a further 10% rally is needed for these options to gain value, some traders were observed making precautionary moves by trading around 12,000 contracts early on Thursday.
ChargePoint’s new CEO, Rick Wilmer, explained that the revenue decline was influenced in part by the labor strike against US automakers and commercial property owners’ hesitancy to install chargers due to uncertainties about the economic direction. Despite these challenges, the company’s long-term potential and growth prospects seem to be driving positive sentiments among investors.
In summary, ChargePoint’s recent stock rally showcases investor confidence in the company’s future, emphasizing its growth potential even in the face of short-term revenue setbacks. The dynamics of the electric car charging industry and ChargePoint’s strategic positioning continue to attract attention despite the challenges encountered in the third quarter.
