EVgo stock price analysis: risk/reward is very attractive

EVgo (EVGO) stock price has staged a strong comeback in the past few months as other electric vehicle companies and EV charging companies like Blink Charging and ChargePoint plunged. It rose to a high of $4.77 this week, its highest point since August 2023 and 192% from its lowest point this year.

In contrast, ChargePoint stock was trading at $1.48, a few points above the year-to-date low of $1.27 while Blink Charging was trading at $1.85, slightly higher than this year’s low of $1.55. This performance means that EVgo is the best-performing firm in the industry.

Fast-growing EV charging company

EVgo has become one of the most ubiquitous companies in the United States as the number of electric vehicle companies has surged to over 3.3 million from less than 200,000 a few years ago.

While the EV industry is slowing, the number of sales is still strong. Data by Edmunds shows that there were over 454k EV sales in the United States between January and May, a number that has likely increased. Hybrid vehicles and plug-in hybrid vehicles stood at 579,038 and 110k in the same period. 

These numbers mean that demand for EV charging will likely continue growing in the near term, which explains why EVgo is doing well. It has over 1 million customer accounts and 1,000 locations in the country. Also, it has partnered with 11 OEM companies like General Motors and Ford.

Last week, it expanded its partnership with GM by deploying 400 fast-charging stalls at key locations in the US. The first flagship store will come online in 2025 and feature up to 20 stores. 

EVgo is still growing its network. In its most recent results, the company said that over 145 million Americans were living within 10 miles of one of its chargers. In its most recent results, the company noted that it will add between 800 and 900 new stalls per year in the next few yeards. 

Its goal is to have 7,000 stalls in the next three to five years. Every 1,000 stores will being its adjusted EBITDA to about $39.5 million.

In theory, EV charging business is a straightforward one to operate. A company like EVgo will typically install chargers and then charge customer whenever they charge in its locations. 

The fee charged depends on the amount of money it pays to the power provider. If the power company charges it $5, it will charge a fee, say $7.

In addition to electricity costs, the company’s expenses include research and development, repair and maintenance, and depreciation. 

EVgo business is growing

The most recent financial results showed that its business was doing well, with its revenue jumping by 32% to $66 million. Most of this revenue came from its charging network, which brought in $36.4 million.

The other revenue came from eXtend and ancillary. eXtend is a solution that lets businesses launch their EV charging venture while ancillary revenue comes from advertisements, sponsorships, charging as a service, and renewable energy credits.

EVgo’s revenue is expected to jump to between $240 million and $270 million this year, up from $161 million in 2023. Analysts expect that its revenue will then jump to over $351 million in 2025.

EVgo also anticipates that its losses will continue narrowing in the next few years. It sees its adjusted EBITDA narrowing from a loss of $59 million to a loss of between $44 million and $34 million this year. The adjusted EBITDA margin will improve from minus 231% in 2021 to minus 15% this year.

Analysts believe that EVgo stock has more upside ahead. According to Yahoo Finance, the average stock estimate by analysts is $5.41, which is about 17% above the current level. The most optimistic analysts are from Cantor Fitzgerald, Needham, and Stifel.

EVgo faces some risks, especially as EV sales start slowing. The other risk is that its business model has not been tested well over a long time. Most notably, there is a risk of depreciation. In the most recent results, depreciation and armotization rose to over $11 million, a 53% increase. However, I believe that the risk/reward is favourable.

EVgo stock price analysis

The daily chart shows that the EVgo share price has staged a strong comeback after becoming a penny stock earlier this year. It has soared from $1.50 to almost $5 today. It formed a golden cross pattern in August as the 200-day and 50-day moving averages crossed each other. 

The stock is now sitting at a crucial resistance point at $4.70, which was its highest point in August. It needs to move above that level to invalidate the double-top pattern that has been forming. 

If this happens, the stock will likely jump to the next point at $5.94, its highest level in August 2023. This price is about 26% above the current level.

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