Citi cuts estimates on EV charging stocks

Citi research updated their estimates on electric vehicle charging stocks Allego (NYSE:), ChargePoint (NYSE:), and EVgo (NASDAQ:) after meeting with management following the companies’ recent financial results.

Analysts wrote in a note, “Despite the recent pullback in EV charging stocks, we remain selective with continued preference for Europe exposure (Allego). Though we don’t think recent U.S. NACS developments (GM/Ford – Tesla) dramatically change the LT fundamental picture for EVgo and ChargePoint, it does introduce NT “headline” risk while shining a broader light on general charging reliability issues often cited for non-Tesla chargers. Initial stock reactions were perhaps too harsh, but valuations weren’t necessarily cheap to begin with. Given the potential for this to remain a NT overhang, we’d like to have more conviction on go-forward revenue growth to become more bullish on U.S. exposure. That said, if NACS ends up accelerating U.S. EV adoption and 3rd party networks can deliver a competitive user-experience, then this could end up becoming a net positive. For this narrative to take hold, we think investors will want to see more evidence of improved reliability/user-experience.”

Citi reiterated a Buy/High Risk rating on Allego and cut their 12-month price target on the stock to $8 (From $9) following recent financial and meetings with management. Overall, the analysts felt encouraged by Allego’s progress. Citi reduced estimates to take a more conservative view of the company’s revenue ramp, partially to reflect the 2023 outlook. However, Citi raised 2023 adjusted EBITDA estimates to reflect guidance and solid Q1 results. Citi continues to favor Europe EV charging exposure, where Allego maintains a solid position.

Citi maintains a Neutral/High Risk rating on ChargePoint and cut their 12-month price target on the stock to $10.80 (From $13) following recent financial for the 1Q and discussion with the company. The main adjustment for CHPT’s model stems from incorporating the FQ2 revenue guidance, which was lower than the analysts originally expected. Citi has also adopted a more conservative long-term perspective after the company joined with automakers Ford (NYSE:) and General Motors (NYSE:) in announcing the adoption of Tesla’s (NASDAQ:) NACS connector.

However, while there is ongoing “headline risk” associated with U.S. NACS adoption, Citi is not fundamentally concerned about it, considering that ChargePoint’s business model offers lower exposure. Instead, the analysts’ main hesitation regarding the stock pertains to macroeconomic risks and valuation. They would like to develop stronger conviction regarding a revenue inflection point before forming a more definitive opinion.

EVgo remains at a Neutral/High Risk rating as the main change in Citi’s model for the company comes from modestly lower revenue estimates, which reflect Citi’s added conservatism on future market share assumptions. As a result, Citi’s 12-month price target on the stock was lowered to $5.10 (From $6.20). And though the analysts do see more NACS-related headline and execution risk for EVgo than for ChargePoint, they don’t view these as disruptive to EVgo’s LT story.

Shares of CHPT and EVGO are down 0.45% and 1.37%, respectively, in premarket trading on Tuesday while shares of ALLG are up 1.04%.