ChargePoint: Equity Capital Raise Is Prudent but Painful; Lowering Fair Value Estimate

We lower our fair value estimate for no-moat ChargePoint CHPT to $5 from $8 following the company’s recent equity capital raise. Our lower valuation is driven largely by the share dilution and a slight increase in our discount rate. We view the shares as slightly undervalued in light of our Very High Morningstar Uncertainty Rating.

On Oct. 11, ChargePoint announced it raised $232 million in equity capital to support the company’s path to profitability in late 2024. We estimate the average price was in the range of $4.50 per share on a blended basis, resulting in roughly 50 million additional shares issued since last quarter. Importantly, the company commented it has no further plans to issue equity between now and reaching profitability in late 2024. We view the equity raise as a painful, but necessary, step to providing the funding runway over the next 12 months. ChargePoint remains focused on a combination of gross margin improvement and tight operating expense control to achieve positive adjusted EBITDA in the fourth quarter of calendar 2024.

We believe ChargePoint is well positioned in the level 2 (AC) charging market but enjoys fewer advantages in the direct current (DC) fast-charge segment. We view shares as slightly undervalued relative to our revised fair value estimate, and we see more attractive opportunities elsewhere within the EV investing landscape.