Even if you like EVgo (NASDAQ:EVGO), the company’s stock looks like a no-go due to recent deals between a well-known electric vehicle (EV) manufacturer and two giant automakers. Therefore, I am bearish on EVGO stock.
EVgo is an ambitious start-up business that has a network of EV charging stations. This might sound like a terrific growth opportunity for prospective investors. Yet, the market isn’t bullish on EVGO stock, and while I don’t always agree with the crowd, I actually share their sour sentiment in this instance.
As we’ll discover, at least one insider bought EVgo shares not long ago, and Wall Street’s analysts aren’t ultra-bearish on the stock (though that’s liable to change). Nevertheless, after you’ve heard the latest developments in the EV space, you’ll probably choose not to consider a long position in EVgo today.
EVgo Posts Seemingly Strong Sales, but Don’t Get Too Excited
EVGO stock has been on a steep downtrend lately, and this might baffle some investors. After all, the stock should be moving higher since EVgo posted a first-quarter 2023 earnings beat. Be sure to delve into the details, though, before you think about jumping into a trade.
It’s true that EVgo posted a quarterly net loss of $0.18 per share, slightly beating the consensus estimate of a loss of $0.19 per share. Furthermore, EVgo’s Q1-2023 revenue increased 228.6% year-over-year to $25.3 million, and those sales figures look impressive.
On the other hand, EVgo’s quarterly sales fell short of Wall Street’s forecast by $1.5 million. Moreover, EVgo’s guidance for Fiscal Year 2023 revenue is rather vague, at a wide range of $105 million to $150 million. Analysts, meanwhile, called for revenue of $138.8 million.
So, EVgo’s results and outlook aren’t ideal. For what it’s worth, an EVgo insider, Chairman David Nanus, recently bought 5,882,352 shares of EVGO stock. That’s a bold $20+ million bet, but is it enough to convince cautious financial traders to invest in EVgo?
The answer is — probably not. Traders are likely still skittish, as EVgo disclosed an underwritten public offering of around $125 million worth of Class A shares last month. Even beyond the share dilution concerns, it’s not necessarily a positive sign if EVgo feels the need to boost its balance sheet by selling a large number of shares.
Tesla’s Charger Deals Spell Trouble for EVgo
In case there weren’t already enough reasons to worry about EVgo’s future prospects, the EV infrastructure industry dropped not just one but two bearish bombshells on EVgo. Late last month, Tesla reached an agreement with Ford (NYSE:F), so that now and in the future, anyone who owns a Ford vehicle will have access to Tesla’s network of rapid EV charging stations known as “superchargers.”
Furthermore, in a still-fresh development, General Motors (NYSE:GM) established a similar EV charging agreement with Tesla to the one that Ford forged with Tesla. According to a Barron’s report, General Motors anticipates that its EVs will be able to access Tesla’s “supercharging” network sometime in 2024.
This is good news for the vehicle electrification movement in general since it will allow convenient interoperability between EV and charging brands. However, it’s potentially devastating news for a competing EV charging station provider like EVgo.
It makes sense that EVGO stock dropped like a rock today, as traders can envision many Ford and General Motors EV drivers using Tesla’s “superchargers” because they recognize the familiar Tesla brand name instead of going out of their way to try an EVgo charger.
Is EVGO Stock a Buy, According to Analysts?
All in all, Wall Street has been fairly optimistic about EVgo, though this could change at any given moment. On TipRanks, EVGO stock has a Moderate Buy rating based on four Buys, three Holds, and one Sell rating assigned in the past three months. The average EVGO stock price target is $8, implying 138.8% upside potential.
Conclusion: Should You Consider EVGO Stock?
In case you haven’t figured it out already, I’m definitely not recommending taking a long position in EVGO stock. I usually root for start-up businesses seeking to support clean energy initiatives. Yet, Tesla’s new EV charging agreements are just too problematic for EVgo.
Maybe at some point in time, there will be reasons to consider investing in EVgo. For the rest of 2023, however, it’s simply too risky to consider buying EVGO stock, and current shareholders might want to think about cutting their losses and moving on to something safer.