EVgo Earnings: Network Throughput Grows, but So Does Cash Burn

We maintain our $5 fair value estimate and no-moat rating for EVgo EVGO following the company’s first-quarter results. We view shares as slightly overvalued.

EVgo’s network throughput increased 124% year-on-year to 17.9 gigawatt hours. Higher throughput was driven by continued EV sales and particular strength from rideshare drivers, which we expect to be a material percentage of EVgo’s long-term demand. Operationally, the company continues to make progress upgrading its older, 50 kw chargers, which now account for less than half of its charging stations.

In addition to its company-owned charging stations, EVgo signed an expanded agreement with Chevron to offer its eXtend solution to station owners looking to add EV charging infrastructure. While EVgo’s eXtend offering is likely to be a near-term revenue driver, we continue to view its company-owned charging network as the primary driver of its long-term value.

EVgo ended the quarter with approximately $160 million of cash, a decrease of $80 million from year-end. However, management noted cash burn should be lower going forward given the pre-purchase of charging equipment (roughly $30 million) in the first quarter. We continue to see the need for additional capital to fund the company’s charging station growth over the next couple of years. Management believes it has financial runway through mid-2024 at current cash levels. Longer term, we continue to see strategic options as relevant for the company given its concentrated ownership (LS Power owns 73% of shares).

While EVgo remains well positioned to benefit from rising EV adoption (particularly non-Tesla), we view its lack of differentiation and balance sheet constraints as key offsetting considerations. As such, we view there to be more attractive investment opportunities within the EV investing landscape.