EVGO - EVgo: Huge Sales Growth Not Translating Into Profitability

2023-11-27 16:23:47 ET

Summary

• EVgo, Inc. provides an electric vehicle charging network and has seen a huge uptick in sales and revenue growth should continue to be impressive going forward.
• The company also currently enjoys a solid balance sheet. Unfortunately, sale growth is not translating into profitability.
• Where does this "Busted IPO" go from here? An analysis follows in the paragraphs below.

Fantasy is a necessary ingredient in living, it's a way of looking at life through the wrong end of a telescope .”? Dr. Seuss.

Today, we take a look at another electric vehicle ("EV") related concern that has not panned out for investors since going public and finds its stock deep in " Busted IPO" territory. The stock is seeing a massive ramp up in revenue growth. Can that turn the company's prospects around? An analysis follows below.

Company Overview:

EVgo, Inc. ( EVGO ) is headquartered in Los Angeles. The company owns and operates a direct current fast charging network for electric vehicles ("EVs"). EVgo offers electricity directly to drivers, who access its publicly available networked chargers; original equipment manufacturer [OEM] charging and related services. EVgo works collaboratively with these OEMs, utilities, suppliers, housing contractors to construct and operate charging and construction facilities via electric stalls.

The stock currently trades just above three bucks a share and sports an approximate market capitalization of $950 million. The company came public via a SPAC named Climate Change Crisis Real Impact I Acquisition Corporation in the spring of 2021.

Third Quarter Results:

On November 8th, EVgo, Inc. posted its third quarter numbers . The company had a GAAP loss of 9 cents a share. Revenues did increase by more than 230% on a year-over-year basis to $35.1 million. Network throughput increased to 37 GWh from just 12 GWh in same period a year ago.

The company added 106.000 new accounts during the quarter to end the quarter with 758,000 accounts. This is a 58% increase from Q3 2022. The company added 240 electric charging stalls during the quarter and now has 2700 operational. This is one third more than the same quarter a year ago. The company now has facilities in 35 states and 68 cities. Another 700 stalls are under construction.

This is how revenue broke down for EVgo in the third quarter.

Management updated its FY2023 sales guidance to between $148 million to $158 million and leadership expects an adjusted EBITDA loss of between $62 million to $66 million for this fiscal year as well.

Analyst Commentary & Balance Sheet:

Since third quarter results posted, Cantor Fitzgerald lowered its price target to five bucks a share from $7 previously but maintained its Buy rating on the stock. TD Cowen ($5 price target), Needham and RBC Capital ($5 price target) all reissued Hold ratings on the stock.

Approximately one out of every four shares of outstanding float in the stock is currently held short. A director sold over $25 million worth of shares on May 22nd. Since then, other insiders have sold nearly $800,000 collectively worth of equity. EVgo, Inc. ended the third quarter with nearly $230 million worth of cash and marketable securities on its balance sheet . In the first nine months of this fiscal year, the company has posted a net loss totaling nearly $99 million. EVgo posted a net loss of $28.2 million in third quarter, which included $24 million for capital expenditures. The company has no long-term debt.

Verdict:

EVgo, Inc. lost 40 cents a share on just under $55 million of revenues in FY2022. The current analyst firm consensus sees losses increasing to 51 cents a share in FY2023 even as revenues are projected to nearly triple to $153 million this fiscal yet. They estimate losses will stay the same in FY2024 as sales rise to north of $260 million. The company should also benefit from the National Electric Vehicle Infrastructure or NEVI funding under recent legislation which was delved into via this article on Seeking Alpha in September.

Other than the huge sales growth EVgo, Inc. is delivering, it is hard to find much reason to invest in this former SPAC. 25% of the shares are currently short, and insiders are selling stock. Sales growth is also not translating into profit or even reduced losses. As of September, the network was achieving 15% of overall utilization. Nor is profitability expected to change in the near future. Until that does, EVgo, Inc. stock should be avoided.

When you compare the sorrows of real life to the pleasures of the imaginary one, you will never want to live again, only to dream forever .”? Alexandre Dumas, The Count of Monte Cristo.

For further details see: