EVgo Prepares for Federal EV Charging Funds to Begin Flowing

We maintain our $5 fair value estimate and no-moat rating for EVgo EVGO following the company’s fourth-quarter results. We are surprised at the share price reaction (up 20% at the time of writing) given we view results as mixed. We view shares as overvalued following the sharp move higher.

EVgo reported 2022 revenue of $55 million, at the high end of its guidance range, driven by revenue recognition associated with its eXtend offering. 2023 revenue and adjusted EBITDA guidance, however, were generally below our estimates as the company alluded to the potential for revenue to shift from 2023 into 2024. This is due to timing delays related to the National Electric Vehicle Infrastructure, or NEVI, funding program, where domestic manufacturing standards were more restrictive than initially expected.

While near-term results are likely to be driven by its eXtend rollout with General Motors, or GM, and Pilot Flying J, EVgo’s long-term value hinges more on scaling its company-owned network. The company ended 2022 with 2,800 fast-charge stalls operational or under construction and expects this metric to grow to 3,700 (midpoint) by year-end 2023. We view EVgo as particularly leveraged to growth in EV sales from OEMs such as GM and Nissan given long-standing partnerships, along with new partnerships with Subaru and Toyota.

EVgo ended the year with approximately $250 million of cash on hand. The company noted it believes this is sufficient to fund its 2023 network buildout and most of 2024. The company raised $10 million of equity in the quarter via its at-the-market program and noted it would continue to issue equity on an opportunistic basis moving forward.

We continue to be optimistic regarding longer-term electric vehicle adoption but await further business model validation prior to becoming more positive on owners of charging infrastructure, such as EVgo.