We're witnessing a lot of hype in the electric vehicle (EV) space, and a lot of that extending to charging stations and networks. Today, we'll analyze those stocks and companies – Chargepoint, Volta, EVgo, Blink Charging – and see how these pureplays compare against one another, and against the Tesla Supercharger network and VW's Electrify America.
3 Levels of Charging
If you're completely new to EVs and charging – which I'm going to assume – than it's important to understand how charging works and (generally) the three levels of charging.
Level 1 charging uses a common 120-volt household outlet... you know, the basic ones that are probably in the room you're in right now. Level 1 is the slowest way to charge an EV. It adds between 3 and 5 miles of range per hour. And, honestly, in my opinion, is just an impractical solution... maybe for hybrids, but we're looking at the future of EVs for anything investable, and this isn't it.
Level 2 charging is more commonly used for EV charging, both at a home and public locations. It's a 208-Volt to 240-Volt; which can power 12 and 80 miles of range per hour – quite the improvement from Level 1. Level 2 charging would typically fully power an EV overnight, which is the most practical. These outlets are the same as the ones we use in our (electric) ovens and dryers at home.
Finally, Level 3 charging is also known as DC Fast Charge & Supercharging. You wouldn't be a genius if you guessed this is the fastest type of EV charging right now, at 400-Volt to 900-Volt or 3 to 20 Miles Per Minute (not Hour, vs. Level 1). Level 3 superchargers are not installed at home, because they cost tens of thousands of dollars, and just wouldn't make practical sense when you can charge an entire battery overnight with Level 2.
Now, that you're an expert in EV charging... let's talk about the various companies in the race for building public EV charging infrastructure. This is really important, because we know that gas stations will be things of the past... it's inevitable.
The conversation should always start with Chargepoint, as they are the leader in terms of market share. They have the most charging stations and chargers out there. I'll start by giving you an outdated visual... I don't have a new one, and wasn't going to build one (in full transparency)... but, I do have the updated numbers for you (later).
But, first, some more updated – but still outdated numbers in a graph format.
Although the numbers are higher for every charging network on these graphs, the main order hasn't changed... which is why I'm sharing these to get an understanding of the hierarchy moreso than the numbers. It's mostly easier in visual format, than me just spitting a bunch of numbers... which I will do, for those of you who stick around.
As I mentioned, and you can now see, Chargepoint is the king of the EV charging network. They proudly state (on their website) they have more charging locations than the number of Starbucks, McDonald's, 7-Elevens, Dunkin' Donuts, and Walmarts.
Along, with the massive charging network – which drives the bulk of its revenues, through either CapEx or OpEx customer purchases – Chargepoint also delivers Fleet products for charging and managing fleet, and Residential Products for single/multi-family homes. Chargepoint also recently acquired eBus and ViriCiti to advance its fleet management efforts.
ChargePoint's OEM partners include GM, Nissan, BMW, Mercedes Benz, and Fiat – meaning their cars are fully compatible and integrated with their charging software.
There's no charging networks like Chargepoint in terms of size and diversification in its lines of businesses. We'll talk about valuation after discussing the (smaller) competition.
Volta is a very unique charging network, in its own way. It's actually super-impressive and intriguing model which seems more tech-forward, and very Silicon Valley-ish.
Unlike Chargepoint, it owns the infrastructure – which can be a positive or negative – depending on how you see it... I'll give you my thoughts on the end. So, they are also driving Electricity sales and more interestingly, Advertising Revenue from the large screens on their chargers.
They deliver the ads through their media partners, which seems to be effective based on the Whole Foods case study which increased a brands sales by 35%. They're taking the media world, and bringing it into the EV charging space – which is completely unique! This is reflective in their margins, which you'll soon see.
Volta also offers its users with lower cost of charging, because of the advertising model support. In fact, you can charge for up to 30mins for free on Volta chargers and pay for the rest – which dramatically reduces the cost of charging for many... it's basically a free option.
In terms of chargers, they're not even a close threat to Chargepoint – with just over 2,000 (versus Chargepoint's current 118,000). Volta is in the very early stages, with a very unique model... whether it's long-term viable or not (my thoughts later), it's intriguing at the least.
EVgo is another charging network that came public via SPAC, which is doing impressive things. It's not very clear how many chargers they have, as they have 800 stations listed publicly. Based on the author of this Forbes article in September 2020, I'm guestimating they have close to 15,000 chargers in their network. I'm not sure of this, so don't hold me to it... but, either way they have an impressive list of OEM partners that include Nissan, BMW, and GM, as well as Hyundai, Kia, Ford, and even Tesla.
It's really interesting to me that Tesla has decided to partner with EVgo, which shows alignment of their brand and (unarguably) the majority of EVs out there right now. It's not as surprising to me, given that EVgo is exclusively focused on Superchargers (or DC Fast charging) much like Tesla. They don't really play in the Level 2 charging space – which kind of makes sense to me. Most people that need to charge publicly, probably need it fast... it just sounds logical.
EVgo also has unique partnerships with Fleets, including Uber and Lyft... which again makes complete sense to me as to why Uber and Lyft drivers would need DCFC instead of Level 2 charging. So, the EVgo model is almost future-proof, since we know the chances of it going obsolete are lower... unless we completely switch to battery swapping tech as Nio is doing in China. But chances of that seem to be pretty slim right now. EVgo seems to be very well-calculated and with its capital deployment, and doing so tactfully.
They're also the only charging network with 100% renewable energy... that is BIG. That is a huge alignment with President Biden's goals, and will likely receive some added incentives for growth.
Blink Charging, in terms of numbers, Chargepoint's biggest competitor, with nearly 30,000 charging stations either sold, contracted, or deployed. They have a similar model in that they sell the hardware, but also operate some or offer subscription as a service.
They seem to be expanding very fast, and innovating as well. But, I might just be honest and say copying. As they seem to be copying Volta's model and releasing it in 2022 to generate advertising revenues.
This is where, I believe, size matters... in terms of charging stations out there. It is literally a race, just like the EV space, and it all comes down to who grows the fastest (imo).
Let's talk about valuation now, and compare the different companies. A full breakdown of the Google Sheet, as always, is available to premium members of the Hawk Letter. But, watch the YouTube video for the analysis.
- Chargepoint, in terms of revenues, and charging stations, is the largest by far. Because size matters, it's hard not to pick them. They are on the more expensive valuations, which is why I traded the stock on their latest breakout, but considering exiting here. They're trading for about 25x 2022 sales, and 9x 2024 sales.
- Volta is trading at 16x 2022 sales, which I expect to be cheaper because of their size... they honestly need to be growing a lot faster to take some market share, imo. Also, they lowered 2021 guidance, which I didn't like to see. In terms of margin, however, they lead every other competitor by 10% differential – which is huge! This is how the advertising model seems to be proven. But, as we are now seeing, it's literally being copied by Blink. This is why speed of growth matter.
- EVgo has a valuation of 19x 2022 sales... so more expensive than Volta, but cheaper than Chargepoint. The stock has recently gotten downgrades and dumping, so now could be a good time to enter when we see some strength in the space. In terms of valuation, Volta and EVgo have the most attractive.
- Blink Charging is the most expensive at 57x 2022 sales. I'm having a hard time comprehending why its so expensive tbh... I must be missing something?
In terms of price targets, I used 4.5x 2025 sales as most of the weighting, and found the most upside with EVgo.
- Execution risk is the largest, since (at these valuations) were making far out projections and bets on things that haven't happened yet. There is a lot of risk that the company we pick isn't operating effectively enough. This is why going with the larger, more proven networks helps mitigate that risk, since they are doing something right. Not always the case, but fair enough to assume.
- Technology risk should be considered, given how early we are in the EV movement and how fast things can and are changing. This is the risk I see in a network that's heavily into Level 2 charging, because it's clear that DCFC prevents the risk of the chargers becoming obsolete as battery technology evolves.
- Competition is a big risk in any race. The race to expand quickly at the cost of inefficiently deploying capital is always a risk that needs to be considered. A company (regardless of size) needs to be deploying capital strategically, especially since this is a capital-intensive industry.
I do own some Chargepoint, based on technicals and the breakout it had – but all EV chargers followed the same trajectory... and they're all retracting a bit now. I owned Chargepoint before doing much research, just knowing it was the largest one (which you can't go wrong with imo). But, now that I've taken a deeper dive on the competitors, the space, and more importantly the valuation, I think there is a better play for me.
For me, personally, I don't mind holding on to some Chargepoint, given their market dominance. It's always a tough bet against the market leader... I've seen this in many industries. But, I like to hold the underdogs for more alpha, because there is a potential for upsized returns.
The most attractive, of the competitors, I mentioned is EVgo. EVgo has a solid team and fundamental strategy of focusing on DCFC through 100% sustainable energy... they're clearly thinking of the future. The bonus, on top of all this, is the valuation.
The stock has taken a pullback, and might pullback some more, so I'll wait to enter and DCA in... but they clearly have the most upside on the stock. Right now, they're trading at 3x 2024 sales, which isn't unreasonable. So, if they trade at 5x multiple in 2025, we're still seeing a 150% upside.
It's going to be a bumpy ride with any EV charging stock – just look at the charts, and you'll see. So, you can't expect it to be clean. That's why, for me, this would go in a smaller allocation. My special situations allocation is just 10-20% of my portfolio. So, this would be one stock in there, because I can't handle that kind of volatility. But, maybe it's for you?
Let me know your thoughts, and if this was helpful :) love getting feedback!
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