EVgo: Network Expansion Shaping in 2025 (NASDAQ:EVGO)

Electric vehicle (EV) charging company EVgo, Inc. (Nasdaq: IVGO) announced the registration of more than one million customers in its fast charging network, a move that indicates growth in demand and “a 400% increase since April 2020.” EVgo went public in November 2020 and it has It has since fallen 78.05% due to post-coronavirus supply concerns, higher installation costs, and compatibility issues impacting the thermodynamics of charging infrastructure. However, since superchargers were invented by big players like Tesla, it remains necessary to bridge the gap between battery-powered electric vehicles and the growth in chargers. In this article I’ll explain why EVgo is on hold due to its strategic partnerships with auto companies that are set to grow its customer base and revenue over the long term.

EVgo partners with OEMs

The idea of ​​offering customized solutions to vehicle manufacturers was an idea A hallmark of EVgo’s success with the company highlighting a series of partnerships over the years. EVgo has it a partner With other companies, “Nissan, General Motors, Subaru, Toyota, Tesla, BMW, Kia, and Hyundai” (referred to as Original Equipment Manufacturers – Original Equipment Manufacturers). For example, Nissan EV customers get EVgo charging service when they purchase or lease a vehicle. Back in 2022, Subaru Announce It has chosen EVgo as its preferred destination for charging electric vehicles. Among the notable features were 100% renewable electricity, daily/reliable customer service, and shorter rapid charging times. Benefits such as tax incentives attributed to rebates and tax breaks given for free or affordable charging have attracted buyers of electric vehicles.

With Toyota in North America, EVgo announced a deal in 2022 that saw customers of Toyota’s bZ4X battery electric SUV get free charging at public fast-charging stations for a year. By the first quarter of 2022, EVgo had already established itself in about 35 states in the United States. The only problem here is that the bZ4X SUV (2024 release) no longer qualifies for the $7,500 federal tax credit. At the beginning of the year, Toyota reported that 29.2% of its total sales in 2023 were electric vehicles, totaling 657,327 vehicles, indicating that it was growing its sales of plug-in electric vehicles despite some of its brands not receiving tax breaks.

What’s more, the relationship between Toyota and EVgo is gaining momentum, especially at public charging stations. Toyota recently announced that its customers in California will receive direct current powered (DCFC) fast chargers at every EVgo charging kiosk that will be installed in the state. Through the Impact Vision project, Toyota intends to accelerate its electrification goal while helping EVgo establish more electric vehicle stations and grow its customer base. As of Q1 2024, California had the highest number of electric vehicles in the U.S. at 25.5%, and thus represents an exciting location for EVgo’s growth. The International Energy Agency estimates that about 17 million electric cars will be sold globally in 2024 alone. Then, the biggest concern is where all these drivers will charge their cars.

Revenue growth over the years

Since fiscal 2020, EVgo’s revenues rose more than 1,000% (from $14.6 million to $161 million) in the year ending 2023 driven largely by the electric vehicle revolution.

EVgo’s numbers are growing as the company eyes more than 46,000 potential chargers in the United States. The company has at least 3,240 charging kiosks (containing chargers) in 35 US states, showing impressive growth in the second half of 2024. As of February 2024, research showed that there were just over 61,000 electric vehicle charging stations Available to the public in the United States More specifically, about 6 in 10 US citizens live within 2 malls of a public electric vehicle charger.

With the growth in EVgo’s numbers, the company wrote in 2022 that more than 130 million US residents live within a 10-minute radius of its fast charging station. EVGO manages to achieve up to 80% EV charging in about 45 minutes and a maximum of 120 minutes for a 100% charge. The continued growth (from 2018 on) in both charging stations and outlets within the US probably means that the discussion around EV adoption is not going to end anytime soon.

In the first quarter of 2024, EVgo’s revenue increased 118% (year-over-year) to $55.2 million from $25.3 million in the three months to March 2023. The company also posted a gross profit of $6.8 million in the quarter, an upside margin of 12.4%. (on an annual basis). ) compared to 0.2% (on an annual basis) in the first quarter of 2023. EVgo attributed this growth to higher revenues from charging stations and better utilization of station costs.

Automatic charging effect +

In my opinion, EVgo’s reputation for fast charging has been influenced by the Autocharge+ (plug-in) technology. EV drivers (since introduced in 2022) are only required to plug their vehicles in (for charging) without the need for an order or physical cash payment. Aspects such as identification, EV user authorization, and even payments happen in the background, giving the user time to recharge. What’s even more profound is that drivers who use Autocharge+ get successful charges on their first attempt. By the end of fiscal 2023, EVgo’s customer base exceeded 884,000 after adding more than 110,000 in the fourth quarter of 2023 alone. All an EV charger needs is an Open Charging Point Protocol (OCPP), to enable a seamless link between the charging station and the EV backend feature. To me, it was no surprise that the company increased its user base to over 1 million users in Q2 2024.

However, there is also the impact of Tesla’s North American Charging Standard (NACS) which Tesla has claimed will be adopted by all major OEMs by 2025. EVgo announced that it is in the process of deploying the NACS EV connectors used by Tesla and other companies. Tesla vehicles. Since 2022, EVgo has been using the Compact Charging System (CCS) with charging speeds of up to 350 kW. By Q1 2024, EVgo’s overall usage had increased to 19% from 9% in the previous quarter.

By deploying NACS connectors (in addition to CCS charging systems), EVgo will increase its competitiveness by opening its network to more vehicles. For its part, Teslas and other cars in production will be able to use EVgo’s Autocharge+ technology, allowing for a seamless charging process. EVgo is also looking to expand its electric vehicle reach to more than 50 models with Autocharge+ through 2025, making it the fastest-growing charging network in the United States.

evaluation

EVgo is currently trading at over $2 with a market capitalization of $649.37 million. The forward P/B ratio is 0.41 versus the industry average of 2.48, leaving a spread of -83.66%. This metric shows that the stock is slightly undervalued and is currently trading lower in relation to its assets.

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Despite recording revenue of $55.2 million in the first quarter of 2024, EVgo posted a net loss of $28.2 million in the quarter which is more than half of the revenue generated. However, this loss was 22.95% lower than what was recorded in the fourth quarter of 2023.

EVgo also needs to update its pricing data to maintain compliance with the new tariffs as it adopts new EV models in its charging features. Right now, it needs to update its pricing points from consumption-driven energy utilities to grow revenues.

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EVgo’s agreements with OEMs are a turning point in the company’s future earnings as it expands its competitive landscape. Through these new collaborations, the company has increased its annual revenues by more than 1,000% since 2020 indicating a growth trajectory until 2025. However, the company’s loss in the first quarter of 2024 was more than half of the recorded revenues, indicating that it must More alignment in pricing even as it embraces new EV models in its network. I think EVgo is headed into the second half of 2024.

Editor’s Note: This article discusses one or more small-cap stocks. Please be aware of the risks associated with these stocks.