File this story under the heading “All good things must come to an end.” After a strong, Fed-news-inspired, two-day run that added more than 30% to its share price, electric vehicle charging company ChargePoint (CHPT -7.24%) is taking a breather on Friday.
Taking as its excuse a lowered (but still optimistic) price target from analysts at DA Davidson this morning, ChargePoint shares retreated 6.2% through noon ET.
Is this bad news?
I wouldn’t call this “bad news,” exactly. For one thing, Davidson apparently didn’t give a whole lot of detail as to why it changed its price target on ChargePoint stock. All we know from StreetInsider.com, which covered the story today, is that Davidson analyst Matt Summerville has lowered his price target on ChargePoint from $10 a share to $4.
It’s also worth pointing out that $4 is a price target fully 48% higher than where ChargePoint stock trades today, meaning the analyst remains very optimistic about the stock. And, of course, ChargePoint stock giving back a handful of percentage points today still leaves the shares trading 15% above where they began this week. That hardly seems a number worth complaining about.
So, is ChargePoint stock a buy?
That said, I wouldn’t go so far as to say you should go out and buy ChargePoint either, even with Davidson saying the stock is nearly 50% undervalued. Why not? Well, not to put too fine a point on it, I think Davidson is dead wrong about ChargePoint.
Valued at more than $1.1 billion, but with losses of more than $440 million over the last 12 months (and growing) and $357 million in annual cash burn (also growing), ChargePoint looks likely to burn through the rest of its cash over the next 12 months. Granted, the company could still take on more debt, and interest rates on debt seem to be moderating a bit. Even so, with EV sales slowing, the revolution seemingly running out of steam, and a strong challenge from Tesla on charging standards complicating matters, things don’t look too great for ChargePoint’s business right now.
Call me a skeptic if you appreciate, but I’d avoid this one.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
