ChargePoint Stock Drops Significantly, Why Was That?

ChargePoint Holdings (NYSE:CHPT) manufactures electric vehicle charging stations. It currently operates the largest network of independently owned stations, and it has a presence in over 14 countries.

However, the last couple of months have been a little rough on the company. In December 2021, its stock dropped by 25%. Then again, in January 2022, the stock saw an additional drop of 14%.

As expected, investors are now asking themselves two questions. What’s going on? And what’s going to happen next?

Is There an End to the Fed’s Actions?

Up until now, ChargePoint had been the sort of company to always come up with astounding predictions. Not only that, but it was also capable of surpassing them at consistent rates. Just this past year, it managed to do just that in two out of four quarterly reports.

Under normal circumstances, that would motivate investors to purchase some shares. But then came the predictions for 2022.

But before that, let’s get some context. As of today, we’re currently going through some of the biggest inflation rates we’ve ever seen. As a matter of fact, they’re the highest they’ve ever been in the past four decades.

The Federal Reserve opted to forego its initiative to mass buy bonds to balance this out. In addition to their choice to raise interest rates considerably. 

Altogether, these actions have hurt the prospects for ChargePoint’s 2022. To simply put it, their revenue and earnings will be nowhere near their 2021 figures.

So, What’s Next?

Regardless of the situation, investors should remember a couple of things.

Nowadays, ChargePoint is spending lots of money on upgrading its charging stations. They’re hoping that they’ll increase their revenue in doing this. 

The last time they did such a thing, they decreased production costs, leading to a gross margin increase of 25%, which means that their actions are entirely viable.

Not to mention, the demand for electric vehicles is ever-increasing. It makes sense that the need for charging stations should also increase.

In essence, ChargePoint might be in a tricky spot right now. But there’s no denying that its prospects for the “longer” term outweigh the opportunities for the rest of 2022. With that knowledge, you might as well use this decrease as an entry point to the company’s earnings.