ChargePoint Looks Like a Cautious Buy After Earnings ChargePoint Holdings stock looks to have found a floor. The company faces some short-term obstacles, but the long-term trend is positive. Risk-tolerant investors should look to make opportunistic buys in CHPT stock.

Is that a floor I see? That's the question that ChargePoint Holdings (NYSE:CHPT) investors need to ask themselves?. CHPT stock went north of $40 per share in February, but for many reasons the stock dropped over 50% after the company began trading under the CHPT symbol.

However, after closing at a price of $20.48 on March 26, 2021, CHPT stock has managed to find support at higher levels. While it may be too esarly to say that it will be smooth sailing, it does appear that the stock may no longer be as overvalued as it was just a couple of months ago.

The Case For CHPT Stock

This time really does look different. The question has become a "simple" matter of when electric vehicles will be ready for mass production. Yes, the global chip shortage is creating a short- to medium-term obstacle. But the technology is finally catching up to consumer sentiment.

And before that happens, the nation's network of electric charging networks must be built out. ChargePoint is the sector leader and well-positioned to maintain that lead.

Also, ChargePoint's revenue is almost perfectly correlated to the number of EVs on the road. So as the number of EV's increases, it's likely that ChargePoint's revenue will increase as well.

The Case Against CHPT Stock

The biggest argument against ChargePoint that I see is that, while the company operates the largest charging network in the world, it's moat may not be that big. The company already faces competition from a publicly-traded company like Blink Charging (NASDAQ:BLNK). Blink just won a significant contract from the state of Ohio's Environmental Protection Agency to build a network of charging stations throughout the state.

There are also at least two companies, Volta Charging (NYSE:SNPR) and EVgo (NYSE:CLII) that are going public via a SPAC in 2021. And there are other privately-owned companies that may be disruptive in the space.

A second risk facing ChargePoint is that its network is largely of the 240V Level 2 type. These stations are facing competition from the new DC fast-charging stations. If the DC networks become the de facto standard, that will be a hit to ChargePoint's earnings as they replace their existing network.

A third risk is that electric vehicle adoption may not proceed as quickly as initially expected. A significant factor behind the spike in CHPT stock was the expectation that the EV infrastructure buildout would begin in earnest in 2021. That's still a possibility, but with the Biden administration's infrastructure plan getting slimmer with each passing day, there may not be as much money set aside for charging stations as initially planned.

In that case, the chicken-and-egg argument will continue. Consumers will be reluctant to buy an EV without a charging network to support it. And a charging network becomes inefficient without a fleet of EVs that need to be charged.

ChargePoint Stock Looks Like Less of a Risk

Investors should always ask themselves what is the price of being wrong? A couple of months ago, the price of being wrong on CHPT stock looked steep. Today, it looks much more manageable. ChargePoint has been in business for 13 years and is not profitable. Furthermore, analysts don't expect that to change in the next two years at least.

With that said, the reality is that the United States is still in the early innings of building out our EV charging infrastructure. ChargePoint doesn't have to win every contract to be a significant player in the space. And if it remains the sector leader, the current share price will look like a bargain.

Slower EV adoption will make it very difficult for CHPT stock to generate enough revenue to support its current or future valuation. However, analysts are bullish on ChargePoint and that should drive institutional investors to continue to jump on board.

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