On Wednesday, Needham, an investment firm, adjusted its outlook on ChargePoint (NYSE:CHPT) Holdings Inc. (NYSE: CHPT), a company specializing in electric vehicle (EV) charging solutions. While reaffirming a Buy rating, the firm reduced the shares price target to $3 from the previous $4. This change follows ChargePoint's fourth-quarter financial results and subsequent company commentary.
ChargePoint, which has been experiencing a downturn in the demand for charging hardware, attributes the slump to negative sentiment around EV adoption. The company anticipates facing two more challenging comparative periods and acknowledges that a projected return to growth in the second half of the year is uncertain. This is partly due to North American customers adopting a dual-sourcing model for their charging hardware needs.
Despite these challenges, ChargePoint delivered better bottom-line results, which Needham attributes to effective margin and operational expense (OPEX) controls. Furthermore, the firm noted that ChargePoint's liquidity requirements remain consistent with previous estimates. To enhance revenue, ChargePoint is looking to increase its focus on software services, drawing from its European experience where hardware dual sourcing is more prevalent.
The revised $3 price target is based on a 12.5 times multiple of Needham's lowered adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast for the year 2028, which has been discounted back to the present. The impact of ChargePoint's strategic shift towards software and the potential benefits it could bring remains to be seen, as the timing and extent of any positive outcomes are currently uncertain.
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