EVgo (NASDAQ: EVGO) is among the fastest-growing charging networks for electric vehicles (EVs) in the U.S. It is also the first EV charging company to be powered entirely by renewable energy. EVgo has more than 950 fast charging stations in 60 cities across 30 states, allowing the company to serve over 375,000 customer accounts.
The worldwide shift towards clean energy solutions makes EVgo a solid long-term bet. Currently, transportation in the U.S. accounts for 30% of total carbon emissions. Further, more than $500 billion has been committed to developing EVs in the next five years.
Original equipment manufacturers are expected to introduce 50 new EV models in the next two years, accelerating the adoption of battery-powered vehicles.
EVs accounted for 4.4% of light-duty vehicle sales in North America last year, while EVs accounted for 17% of sales in Europe. Both these numbers should move higher in the upcoming decade. Let's look at EVgo's financials and valuation to see if it should be part of your portfolio right now.
EVgo has increased its sales from $13 million in 2020 to $22.2 million in 2021. Its sales are now forecast to rise by 126% to $50.17 million in 2022 and 187% to $144 million in 2023. So, EVgo stock is valued at 44x forward sales, given its market cap of $2.2 billion, which is really expensive.
Shares of EVgo are overvalued despite falling 62% from all-time highs. Its sky-high valuation makes the stock a risky buy considering a volatile market backdrop and its negative profit margins.
While sales were up 86% year-over-year in Q1 at $7.7 million, EVgo reported a gross loss of $600,000 in the quarter. Its gross loss, however, accounted for 12.8% of sales compared to its year-ago ratio of 41.5%.
EVgo ended Q1 with a network throughput of 8.0 GWh, up from 4.1 GWh in the prior-year quarter. The company posted its strongest-ever quarterly results in Q1 on the back of higher retail and fleet charging revenues.
EVgo will continue to work with partners to expand its charging ecosystem. For example, Chase Bank selected EVgo to build its DC fast chargers at 50 retail locations. EVgo's CEO, Cathy Zoi, explained, "We are well positioned to capitalize on the strong tailwinds from increased growth in EV demand in the U.S. and continue the momentum for the remainder of 2022."
EVgo ended Q1 with a cash balance of $441 million, providing it with enough liquidity to improve profit margins over time. In addition, the company is poised to benefit from a first mover advantage and its widening presence in the U.S. if it successfully creates a robust network planning strategy.
Several regions in the U.S., such as California, have a developed EV market. So, EVgo is profitable in these regions on a cash flow basis, even at modest penetration levels. Areas such as Los Angeles, Portland, and Phoenix are also showing favorable cash flow profiles.
EVgo forecast sales of $2 billion and adjusted EBITDA of $700 million if EV penetration in the U.S. touches 5%. At a penetration rate of 15%, sales might rise to almost $5 billion with an EBITDA of $1.9 billion, indicating a margin of over 35%.
EVgo stock is a high-risk, high-reward investment for long-term investors. Right now, EVgo stock price is trading at a discount of 35% compared to consensus price target estimates.
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