CHPT - Why TPG Pace Beneficial Is the EV Charging Play to Know
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The SPAC boom has started to lose some serious momentum of late. Accordingly, investors in TPG Pace Beneficial Finance Corp. (NYSE:TPGY) stock have seen shares of this SPAC drop by more than 50% from their peak earlier this year.
Investors in TPGY stock are buying EVBox, the announced merger target of this SPAC. According to the announcement made late 2020, it was expected the merger would take place sometime in the first quarter. However, the merger is still incomplete.
EVBox happens to be a European EV charging company investors are keeping their eye on right now. As of February, the company had sold more than 235,000 charging ports. The company’s growing revenues quickly and expects this growth to accelerate as EV adoption picks up steam in Europe.
EVBox isn’t only an EV charging station play. The company’s product offerings include a range of residential and commercial/corporate fleet solutions for its clientele. Accordingly, this company provides investors with an attractive diversity of revenue streams.
For investors interested in EV charging stocks, here’s why I think TPGY stock could be the one to keep on the watch list right now.
TPGY Stock Has Excellent Value
A tremendous amount of growth is being priced into EV charging stocks right now, and for good reason.
This sector is one with among the most favorable political backdrops of any sector today. Governments are in a race to develop the infrastructure to support an EV boom, and Europe is no exception.
According to the company’s most recent projections, revenues for 2021 and 2022 are expected to grow at 71% and 88%, respectively. That’s one heck of a growth rate.
Fellow InvestorPlace guru Mark Hake did some digging into the numbers and quantified how cheap TPGY stock appears to be today. His analysis focused on comparing EVBox to ChargePoint Holdings (NYSE:CHPT). His take was that TPGY could be an easy double-up for investors, if the company’s valuation gap compared to its peers narrows.
Indeed, this comparison is a fair one, considering the respective positions of these large players in their core markets. However, I’d also invite investors to consider that TPGY appears to be broadly undervalued compared to the sector.
I think there’s a couple reasons for this valuation discrepancy.
First, I think European companies in general are at a disadvantage to American companies when it comes to access to capital and global fund flows. U.S. equities are widely viewed as the highest-quality risk assets globally. Accordingly, there’s some amount of the premium U.S. stocks get that can be attributable to higher global capital inflows.
Second, as a Europe-focused EV charging play, EVBox is less-exposed to the favorable political environment that has taken U.S.-based clean energy stocks on a nice ride of late. Yes, European governments have shown broader and longer-lasting support for clean energy in recent decades. However, President Joe Biden’s outright support for U.S. domination in the EV space makes for a recipe for outsized premia for U.S.-based EV charging stocks.
Conclusion
I think TPGY is an intriguing value play in the EV charging space today. Additionally, I think this stock may be generally overlooked due to its European focus right now.
EVBox is a company with excellent fundamentals and forward-looking growth projections. On this basis alone, I think investors willing to put a little risk capital to work on this sector will want to consider stocks like TPGY today.
That said, I do think there remain questions about the ultimate long-term profitability of this sector. There isn’t really a road map I’ve seen for these companies to make money as of yet. It’s a nascent sector, so this will likely take time. However, until I see a road map to meaningful bottom-line growth, I can’t say I’ll be joining the EV charging fray.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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