This morning, ChargePoint's share price witnessed a 7% rise.
ChargePoint Holdings (CHPT dropping by 3.39%) saw an unexpected 7.8% surge in its stock price during the early hours of 9:55 a.m. ET on Thursday, following the release of its mixed Q3 earnings report the previous night.
Analysts had projected a Q3 loss of $0.09 per share on sales of approximately $90 million. To everyone's surprise, ChargePoint exceeded the sales forecast, reporting revenue of $100 million. On the downside, the company's loss was nearly double the predicted amount at $0.18 per share.
ChargePoint Q3 Financial Summary
ChargePoint's overall sales dipped by 10% compared to the same time last year. The most significant drop was observed in revenue from the electric vehicle charging sector, declining by 29% year on year. In contrast, subscription revenue saw a rise of 19%. The company managed to offset the decline in sales by cutting operating expenses by 30%, resulting in a significant reduction (nearly half) in net losses.
The decline in per-share net losses (58% lower than the previous year) can be largely attributed to the company's decision to issue and distribute more shares, diluting losses across a larger number of outstanding shares.
Despite the decrease in net losses, ChargePoint is still grappling with substantial cash burn, with the first three quarters of the year reporting a negative cash balance of $154.4 million. Although this is an improvement compared to the $302.1 million burn rate from the same period last year, it's still a concern that necessitated the sale of more shares to generate cash, in the absence of positive free cash flow.
Is ChargePoint Stock a Good Investment?
Given the company's losses and continued cash burn, investors may be questioning why the stock is gaining value. The appointment of a new chief revenue officer with a mandate to boost revenue growth could be a factor. While Q3 revenue surpassed expectations, it's worth noting that the revenue decline continued, and the company's guidance for Q4 revenue (ranging from $95 million to $105 million) seems unlikely to meet Wall Street's target of $101 million, and is even lower than the $107 million in Q4 revenue from the previous year.
With revenue trending downward and losses persisting, it might be challenging to consider ChargePoint stock as an investment opportunity at this point.
In light of the company's financial summary, investors are considering whether to continue investing in ChargePoint, as the stock price increased despite its reported losses and negative cash balance. To mitigate these issues, ChargePoint issued more shares and appointed a new chief revenue officer to boost revenue growth.
Despite the appointment and surpassing of sales expectations in Q3, investors might find it difficult to justify investing in ChargePoint due to the ongoing revenue decline and lack of positive free cash flow, which has resulted in significant cash burn throughout the year.
