EV charging leader ChargePoint (NYSE:CHPT) has hit a rough patch recently. CHPT stock dropped 29% over the past month amid worries surrounding a lack of charging infrastructure spend in Biden’s new infrastructure bill. Also present are concerns that EV spending will take a backseat in the event that Covid-19 becomes a headline problem again.
We think this dip is a buying opportunity. The reality is that you’re buying ChargePoint stock for its 5- to 10-year potential, not its 3-month potential.
EVs Are the Future
And ChargePoint powers those EVs.
Over the next 5 to 10 years, EVs are going to replace gas-powered cars on roads across the globe. This seismic shift in the auto market will coincide with a seismic shift in transportation infrastructure to support the widespread adoption of EVs — the centerpiece of which is a shift from gas stations to charging stations.
Over the next decades, tens of millions of charging stations will be built across the globe.
Much like the gas station market, the EV charging station market will turn into an oligopoly at scale, given the network advantages inherent to having only a few really big charging station operators as opposed to hundreds of small station operators. In that oligopoly, ChargePoint will reign supreme.
The company is already the largest EV charging station operator in America, by a mile, because they were first to market, and they rapidly built out their infrastructure faster than anyone else.
This “head start” constitutes an important and durable competitive advantage, because of network effects.
EV charging stations are networks. Each new charging station that gets added to a network also gets added to the charging station map in ChargePoint’s mobile app.
And so, because the ChargePoint charging network is the biggest in the country, the ChargePoint app includes access to the most EV charging stations in the world. As a result, it is the app that most consumers will use to find charging stations and charge their car.
And the more customers that charge their cars on ChargePoint stations, the more money the company generates to create new charging stations, and the bigger the network gets. It’s a virtuous growth cycle.
The Bottom Line on CHPT Stock
ChargePoint already owns some of the most valuable charging real estate in the country, has leading EV charging tech, and has established partnerships with some major automakers to have their app uploaded into in-car navigation systems.
These advantages strongly imply that ChargePoint will turn into the 400 pound gorilla in the EV charging industry. If that does happen, CHPT stock has multi-bagger potential over the next decade.
Don’t stress near-term gyrations in this stock, no matter how violent. In the long-term stock chart, they’ll look like nothing more than little squiggles when CHPT stock is up above $100 by 2025.
CHPT is but one of my top EV charging picks. Yes, long-term, CHPT stock will score investors big returns, but it’s far from the only hypergrowth stock on my radar.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.