EVgo Stock Is a High-Risk/Reward EV Infrastructure Opportunity

EVgo Inc Building the Backbone of the EV Industry

The electric vehicle (EV) space has strong tailwinds, with significant financial support from President Joe Biden’s administration and a move by the broad automaker industry to electrify their future vehicles.

A major component of the EV sector is the construction of a nationwide charging network akin to the massive network of gas stations.

To play the expected buildup of EV infrastructure, consider mid-cap EVgo Inc (NASDAQ:EVGO), a leading builder of EV charging stations across the U.S. EVgo operates the country’s most expansive public fast-charging EV network that’s also powered by 100% renewable energy.

EVgo stock traded as high as 24.34 in January 2021 before retrenching to $7.00 in January 2022. Shares of EVgo Inc have rallied by 77% since their low, but they still trade 37% below their 52-week high and 49% below their record high.

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At its current price, I see EVgo stock as a decent contrarian opportunity.

Chart courtesy of StockCharts.com

Big Growth Ahead for EVgo Stock?

EVgo Inc has incredible potential, assuming that governments will continue to support the EV push. At this stage, the EV industry is all about tax credits and rebates. If this changes, it would impact the demand for EVs. But based on what we’ve been seeing across the automobile industry, I’m positive the EV craze is real.

EVgo is still in its infancy and will take years to expand. Its revenues declined by 26% to $13.0 million in 2020 and rebounded 52% to $22.2 million in 2021. Analysts expect the company to ramp up its revenues by 134% to $52.4 million this year. (Source: “EVgo, Inc. (EVGO),” Yahoo! Finance, last accessed March 28, 2022.)

I also expect EVgo to continue ramping up its revenues, dependent on government support. It’s expensive to build EV charging infrastructure, however, so don’t expect to see positive earnings before interest, taxes, depreciation, and amortization (EBITDA) from the company anytime soon. It had an adjusted EBITDA loss of $51.4 million in 2021.

The company’s bottom line will also likely see losses for years. Analysts expect EVgo Inc to lose an adjusted $0.44 per diluted share in 2022. (Source: Yahoo! Finance, op. cit.)

In my view, the key for EVgo stock is the company continuing to grow its revenue base. While achieving EBITDA income and profitability is years away, EVgo has the financial resources to play the long game.

At the end of 2021, the company’s cash on hand was $485.0 million, versus $520.0 million at the end of September of that year. EVgo Inc made $65.0 million in capital expenditures in 2021, so I don’t envision any financial constraints at this time. (Source: Yahoo! Finance, op. cit.)

Analyst Take

EVgo stock is a play on the EV space and should deliver strong returns as the company builds up its EV charging network.

While I consider the stock’s current share-price weakness as an opportunity, there’s a relatively large position of 19.6 million shorted shares, which is roughly 28.5% of EVgo Inc’s outstanding shares. (Source: Yahoo! Finance, op. cit.)

If EVgo stock can get some upside traction, I would expect to see some short-covering provide a lift to its share price.