Should one Buy, Sell, or Hang onto EVgo Shares?
EVgo (formerly EVGO, currently down 1.22%), a prominent player in the construction of electric vehicle (EV) charging networks, went public in July 2021 through a merger with a Special Purpose Acquisition Company (SPAC). The merged company's stock initially opened at $15.05 on its debut, but it currently hovers around $4.
Similar to numerous other SPAC-backed EV companies, EVgo promised much and delivered little. In its pre-merger pitch, it claimed revenue growth from an estimated $20 million in 2021 to $166 million in 2023. It indeed achieved a revenue of $22 million in 2021, but the figure only reached $161 million by 2023.
Though the revenue increase was minor, EVgo had also promised to report positive adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by 2023. Instead, it reported a negative adjusted EBITDA of $59 million for the year.
Struggling with intense competition, unfavorable macroeconomic conditions, and a sluggish EV market, EVgo, with an enterprise value of $375 million, seems undervalued at 1 times its projected 2023 sales. So, should investors consider buying, holding, or selling this stock right now?
Analyzing EVgo's business
EVgo has a complex history. Established 14 years ago as part of a settlement between NRG Energy and California Public Utilities Commission post-Enron scandal, NRG was ordered to invest $100 million in creating an EV charging network. This business eventually evolved into EVgo.
Subsequently, NRG sold EVgo to Vision Ridge Partners in 2016, which then transferred ownership to LS Power in 2020. LS Power spun off EVgo, merged it with an SPAC, and took it public in 2021, retaining a significant stake through its wholly-owned affiliate.
Revenue
Since then, EVgo has expanded its reach by acquiring Recargo, developing the PlugShare mobile app for locating EV charging stations, partnering with General Motors, and teaming up with Amazon.
$22 million
Now, EVgo operates more than 1,000 fast-charging stations across 40 states and 65 metro areas. About 145 million people live within a 10-mile radius of one of its charging stations. Customers are encouraged to use EVgo's discounted subscription plans, starting at $6.99 per month.
$55 million
EVgo has carved out an early advantage in the EV charging market, but faces stiff competition from Tesla's Superchargers and other networks like ChargePoint and Blink Charging.
$161 million
Measuring EVgo's growth
EVgo's revenue growth has surged in the past three years. Its number of charging stations (either operational or under construction) grew from 1,903 in 2021 to 3,550 in 2023. The number of customers rose from 340,000 to 884,000 during the same period.
Growth (YOY)
| Metric | 2021 | 2022 | 2023 || --- | --- | --- | --- || Revenue | $22 million | $55 million | $161 million || Growth (YOY) | 70% | 146% | 195% || Adjusted EBITDA | ($51 million) | ($80 million) | ($59 million) |
70%
Much of the growth was driven by its partnership with GM, but this collaboration does not exclude the manufacturer's relationships with other networks like Tesla and ChargePoint. EVgo's stations are also compatible with Tesla's vehicles.
146%
EVgo and rivals like ChargePoint are struggling to balance high construction costs against revenue from charging fees. Cost pressure escalated as EV sales slowed down and interest rates increased, squeezing the expansion of EV charging networks. Consequently, EVgo's adjusted EBITDA remained negative for the past three years.
195%
In the first nine months of 2024, EVgo's revenue increased 71% year over year to $189 million, still posting a negative adjusted EBITDA of $49 million. It ended the third quarter with 3,680 operational stations and over 1.2 million customers.
For the full year, EVgo expects its revenue to surge 55%-65% to $250 million-$265 million, accompanied by a negative adjusted EBITDA of $32 million-$38 million. Despite the messy outlook, growth is expected to continue as the economic environment improves.
Adjusted EBITDA
Deciding on EVgo's stock
($51 million)
Between 2023 and 2026, analysts forecast EVgo's revenue growth at a compound annual growth rate (CAGR) of 44%, accompanied by the turnaround of its adjusted EBITDA to positive figures in 2025 and 2026.
($80 million)
While the stock appears inexpensive considering this growth potential, it has also raised its outstanding shares by 56% through secondary offerings and stock-based compensation. Recently, EVgo Holdings, LS Power's affiliate, also priced another secondary share offering for at least $23 million at $5 per share.
($59 million)
It's been noticed that EVgo's insiders have offloaded almost four times as many shares as they've acquired within the last year. This cold-hearted insider behavior signals that the stock isn't likely to skyrocket anytime soon. Therefore, I'd advise against purchasing EVgo shares at the moment. It might recover eventually, but I'd suggest holding off until we see more concrete indications of a sustainable long-term recovery.
In light of EVgo's financial performance, some may question the wisdom of investing in this company. Despite promising substantial revenue growth and positive adjusted EBITDA by 2023, EVgo has reported disappointing figures and negative adjusted EBITDA instead.
Given the challenging competition, unfavorable economic conditions, and a sluggish EV market, some analysts believe that EVgo's stock is undervalued. However, the company's extensive history of ownership changes, ongoing competition, and negative EBITDA for the past three years may deter some investors from considering a purchase at this time.
