ChargePoint’s Q4 Revenue Misses Midpoint of Guidance Range

We are lowering no-moat ChargePoint’s CHPT fair value estimate to $11 per share from $12.50 following the company’s fourth-quarter results. The driver of our fair value decrease is a reduction to our near-term revenue forecast and slightly lower long-term gross margins. We view ChargePoint shares as fairly valued.

ChargePoint’s fourth-quarter revenue missed the midpoint of its guidance range by 7%, while non-GAAP gross margins improved sequentially to 23% from 20%. Looking ahead to fiscal year 2024, ChargePoint declined to give full-year guidance but provided guidance for first-quarter revenue growth of 56% year-on-year growth. We lower our full-year revenue assumptions and now sit 5% below PitchBook consensus for fiscal 2024 based on first-quarter guidance and management’s commentary.

We expect non-GAAP gross margins to continue to improve—rising to 26% for the year—up from 20% in fiscal 2023 as the company improves the margin profile with its direct current (DC) products. ChargePoint’s continued mix shift in revenue toward DC products and away from (alternating current) AC has driven robust revenue growth but compressed gross margins. We believe there is a wide gap in the margin profile between the two product segments and continued mix shift toward DC is likely to limit the company’s long-term gross margin profile. As a result, we assume non-GAAP gross margins plateau at 32% long term, below management’s prior commentary of mid- to high-30% range.

ChargePoint remains focused on a combination of gross margin improvement and tight operating expense control to achieve its target of break-even profitability by calendar year fourth quarter 2024. The company ended the fiscal year with $400 million of cash and equivalents after issuing $50 million of equity in the fourth quarter. We wouldn’t be surprised to see further actions to bolster liquidity between now and the company achieving profitability.