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Charging point Assets (NYSE:CHPT) the stock appreciated after the publication of its results at the end of May. For the optimistic investor, there is a lot of positive to take from the news. The electric vehicle charging company remains a solid choice as it continues to build future transportation infrastructure.
Given that ChargePoint beat analysts’ revenue expectations but fell short of gross profit targets, it would be easy to conclude that it’s not doing well. Yet there is a clear argument to be made in favor of the charging network operator given the prevailing macro-environment.
The best-case scenario is this: congratulations to ChargePoint for hitting $81.6 million in sales, beating Wall Street expectations by 7.79%. That $81.6 million in sales was even higher than analysts’ high-end forecast of $77 million.
But also extend your understanding to ChargePoint and its gross profit of $12.1 million, well below the $17.3 analysts were looking for. Why? Due to the current market.
|CHPT||ChargePoint Holdings, Inc.||$15.41|
Fundraising helps in many ways
Gross profit is simply revenue minus cost of revenue. Parts cost more now and are harder to come by than they have been at pretty much any other time. So the fact that ChargePoint had to spend more to make sales is pretty easy to explain.
The point here is that demand for ChargePoint products and services is higher than expected, while the gross shortfall is easily explainable. It’s very positive.
An optimistic view of ChargePoint’s April senior convertible note offering is that it helps the company in several ways.
First, the $300 million gross proceeds only bolster the company’s future growth efforts.
Second, the conversion price of $24.03 suggests a lot of upside for ChargePoint investors at current prices.
The fact that the company was able to raise $300 million at this conversion price, slightly above consensus prices, indicates a bright future for the company.
ChargePoint also confirmed revenue forecasts between $450 million and $500 million for fiscal 2023.
This is good news given that the current high estimate according to Yahoo! Funding is $499.7 million. But remember, ChargePoint topped revenue numbers this quarter and it may do so again throughout fiscal 2023.
Operationally, it is making the right choices, as its partnership with the National Electrical Contractors Association announced yesterday to accelerate the deployment of electric vehicle charging infrastructure.
The most important thing to take away from ChargePoint’s latest revenue report is that its exceptionally high revenue numbers should not be ignored. For investors willing to give it the benefit of the doubt when it comes to the cost of revenue, a clear case emerges.
The convertible note financing also speaks to the idea that CHPT stock has a strong advantage going forward. CHPT stock is different from other growth stocks and its business model will prevail.
At the date of publication, Alex Sirois did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.