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EVgo Earnings: Solid Near-Term Results, but Long-Term Competitive Risks Remain

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Securities In This Article
EVgo Inc Class A
(EVGO)

We maintain our $3 fair value estimate and no-moat rating for EVgo EVGO following the company’s second-quarter results. We view shares as overvalued.

EVgo’s network throughput increased 149% year on year to 24.9 gigawatt hours. Higher throughput was driven by continued electric vehicle, or EV, adoption and strength from rideshare drivers, which we expect to be a material percentage of EVgo’s long-term demand. Total revenue increased fivefold year on year as revenue from the eXtend partnership with Pilot Flying J began being recognized in earnest. We view eXtend as a material revenue contributor, but less important to the company’s long-term value given a lower margin profile compared with the company’s owned EV charging network. In addition, the company raised the midpoint of full-year revenue guidance, while lowering the midpoint of adjusted EBITDA. Overall, we make limited changes to our model based on results and the updated guidance ranges.

EVgo ended the quarter with approximately $260 million of cash following a $128 million equity offering during the quarter. The additional funds should support the company’s financial runway into 2025, but we see the need for additional funds in the coming years given the elongated path to profitability.

While EVgo remains well positioned to benefit from rising EV adoption, we view increasing competition and balance sheet constraints as key considerations. In particular, recent announcements by Tesla (opening up its Supercharger network) and by seven leading auto manufacturers to spend $1 billion on a fast-charging network represent long-term competitive risks.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Brett Castelli

Equity Analyst
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Brett Castelli is an equity analyst, energy and utilities, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. His coverage focuses on clean energy companies across renewables and emerging technologies.

Before joining Morningstar in 2021, Castelli spent more than eight years in various analyst roles for TortoiseEcofin, a boutique asset manager. His coverage focused on North America and included companies within traditional energy, electric utilities, and renewables. Additionally, he assisted with the firm's environmental, social, and governance efforts and played an important role in integrating ESG into the investment process. Castelli spent a year at the firm's London office following an acquisition.

Castelli holds a bachelor's degree in finance from the University of Missouri's Trulaske College of Business. He also holds the Chartered Financial Analyst® designation.

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