Al Root

J.P. Morgan believes there is an opportunity in electric-vehicle charging stocks. Investors have to just pick the right ones.

Thursday, J.P. Morgan analyst Bill Peterson upgraded shares of EVgo to Buy from Hold, and downgraded shares of ChargePoint Holdings to Sell from Buy.

He "reinstated" his $7 price target for EVgo. He doesn't have a price target for ChargePoint stock.

The bullish call had EVgo stock up 31.3% in early trading at $51.6 while the S&P 500 and Dow Jones Industrial Average were down 0.2% and 0.5%, respectively.

News that EVgo received a conditional loan commitment of up to $1.1 billion from the Energy Department helped too. Investors typically welcome more cash for unprofitable startups. Wall Street doesn't see EVgo generating positive operating profits for years to come, according to FactSet.

ChargePoint stock was down early, but rebounded and was up 4.2% at $1.36 a share. EVgo's jump appears to be dragging up its peer, despite the downgrade.

The loan isn't the reason Peterson is optimistic though. It boils down to the business model. "Over the next few years, we see core owner-operator players outperforming other charging peers," he wrote.

EVgo owns and operates a network of more than 1,000 fast-charging locations in more than 35 states. ChargePoint, for its part, sells hardware and software for businesses looking for charging infrastructure.

For Peterson, slower EV-sales growth in the U.S. means third parties buying equipment from the likes of ChargePoint will slow spending. That gives EVgo a leg up on growth.

Slower charger deployment isn't great for EV sales, either. "Consumer likeliness to purchase an EV has eroded over the last three years from 25% to 18%," wrote Peterson. "Around 70% of those surveyed cited battery range as a top concern, while 52% cited price, and 49% cited public-charging availability."

Slower sales, mean less third-party spending on chargers, which means less charging infrastructure, which keeps a lid on EV-sales growth. It's a negative cycle Peterson sees EVgo managing through better.

With the new Buy rating, 67% of analysts covering EVgo stock are bullish, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for EVgo stock is about $5.50.

With the downgrade, about 22% of analysts covering ChargePoint stock have Buy ratings. The average analyst price target is about $2.40.

Write to Al Root at allen.root@dowjones.com

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October 03, 2024 10:07 ET (14:07 GMT)

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