EVgo Stock: Loading Up the EV Rise (NASDAQ: EVGO)

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I’d be dead wrong if I took EVgo’s year-to-date volatility (NASDAQ:EVGO) common stock as a sign of a faltering TAM or a management team that is not running properly. The company is down 29% since the start of the year. as the market turned sour on riskier growth assets due to a rising interest rate environment. But this hasn’t stopped EVgo from aggressively pursuing the big opportunities posed by rising EV.

Climate economics bears would be somewhat right to say that there is too much investor enthusiasm for companies like EVgo, which once reached a valuation of just under $6 billion thanks to unrestrained hype around growth in electric vehicles. But the hype is real, and it would be difficult to characterize current growth rates as anything more than material. In fact, in 2012, only 120,000 electric vehicles were sold worldwide. Last year, this sales figure was made on a weekly basis with 10% of all cars sold in 2021 being electric, 4 times the market share in 2019. Gasoline and diesel vehicle sales are already stagnating in numerous developed nations around the world with the shift to electric vehicles is still at a relatively early stage in the United States. Currently only 1% of all vehicles on US roads are electric, but this number will change substantially in the next decade.

The secular shift to electric vehicles is now fully embedded in the post-pandemic economic ethos of most developed nations racing to combat anthropogenic climate change. This prompted the US to enact the Inflation Reduction Act, which will allocate $370 billion to decarbonization initiatives over a decade starting next year. Electric vehicles are set to receive a tax credit of $7,500. Globally, electric vehicles are projected to grow to at least 26.8 million by 2030, up from 6.6 million in 2021. The IRA aims to create the conditions for 50% of all new vehicles sold be electric vehicles or plug-in hybrid electric models by 2030. It will also aim to build at least 500,000 new EV charging stations by this date.

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Electric vehicle charging could be lucrative as revenue growth maintains a solid pace

Bulls should consider this, EV adoption was once extremely anemic with cars widely associated with a marginal subset of the population and certainly remained out of reach for most people. Tesla (TSLA) 2006 “Secret” master plan it actually remained a secret for a while because not many people outside of his ardent supporters cared. This kept the EV economy an insignificant part of global car sales, but now we are all living through the most significant generational change in passenger transport as EV adoption begins its golden age under the sun.

Los Angeles-based EVgo TAM is expanding rapidly, putting the expansion of its charging points on a strong adoption ramp. The company last reported earnings for its fiscal 2022 second quarter saw revenue of $9.1 million. This was an increase of just under 90% from the prior year quarter, but a loss of $1.69 million on consensus estimates and came as the company landed new partnerships. this more I recently saw an alliance with MHX, a Californian logistics operator. EVgo will support MHX’s fleet electrification project with the deployment of its 350kW fast chargers.

Grid throughput reached 10.1 GWh, a 66% year-on-year increase, and the company ended the quarter with 2,397 jobs in operation or under construction. This growth generated a cash burn from operations of $18.5 million, versus a cash burn of $9.1 million in the prior year quarter. But EVgo had cash and equivalents of $344 million at the end of the quarter. This is ample liquidity to overcome what will likely be more cash-burning quarters of growth. The initial stage of EV ramp-up for charging companies will be characterized by heavy capital spending to seize viable locations that increase the visibility of their chargers and provide maximum value to their customers. Therefore, I expect EVgo to continue to post losses for the foreseeable future.

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Riding the wave of electric vehicles towards new records

With the company’s guidance for revenue of no more than $55 million for the full year of 2022, its fiscal 2022 price-to-sales multiple is 36x. A tough and extremely high valuation, especially in the face of a stock market crash. But from Tesla to Lucid Motors (LCID), EV sales are surging and EVgo is poised to take a rapidly accelerating EV market to new highs.

As these become more prevalent on US highways, charging demand will increase in parallel. This has set the conditions for EVgo to be a game of pick and shovel in electric vehicles. The bears would be right to say that stocks are too expensive with a multiple that oddly ranks above SaaS companies. In general they are right. An investment in EVgo is still too risky, especially as the stock market is expected to experience more volatility in the short term.

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