ChargePoint Shock
“I just know that if I rub my nose in my own mistakes, I'm less likely to commit new ones of the same type. So I just go through my life rubbing my nose in my own past mistakes. It works in training a dog, so I think it would work on me."
The Portfolio Performance
The portfolio is UP +18.63% YTD
The S&P 500 is UP +15.91% YTD
ChargePoint Shock (CHPT)
I’m an idiot; I should never have trusted this management team or any of the projections put forth by management and the analysts covering this company. The real story was being told in the Return on Invested Capital (ROIC). ChargePoint’s annualized return on invested capital (ROIC %) for the quarter that ended in July 2023 was -82.02%. As of today (09-07-2023), ChargePoint's ROIC % is -66.43% (calculated using TTM income statement data). ChargePoint earns returns that do not match up to its cost of capital.
ChargePoint stock took a nosedive this morning, falling -25% after an earnings miss reported last night that made everyone say, WTF! The stock is down about -14% right now.
Heading into the earnings call, analysts were already unsure about the prospects for ChargePoint, forecasting $0.15 per share of losses on sales of $153.2 million. Even with that low bar, ChargePoint still disappointed. Sales were only $150.5 million, and losses were $0.35 per share, more than double the expected losses.
ChargePoint missed revenue estimates; however, quarterly revenues grew +39% year over year. But the rub is that ChargePoint earned only a 1% gross profit margin on those sales. A year ago, gross margins were 17%. The hit comes from a $28 million inventory impairment charge.
While the rest of the industry has been slashing costs, maintaining lower inventory levels, slowing hiring, and generally jumping on cost control, ChargePoint is just now planning to cut its operating expenses by $30 million annually, in part by laying off 10% of its workers. Will the reduced staff be more productive? Will management do something new to get their charging infrastructure installed in greater numbers at a lower cost? There's just too many questions.
Considering an $8 million severance expense for ChargePoint's laid-off workers and continued rising losses on revenue increases, I don’t see how this company survives. Either the board immediately replaces the CEO and CFO and pivots just inches before the cliff, or a competitor purchases the infrastructure in bankruptcy court.
While ChargePoint was announcing its race to the bottom and struggle with the economy, Tesla was announcing that it had won the rights to install SuperChargers at 2,000 North American Hilton hotel properties. I would love to know if ChargePoint even made a proposal to Hilton.
Action
Before my readers hit the sell button on ChargePoint, I want you all to consider what value ChargePoint still has in your portfolio. ChargePoint is a tax loss to be harvested. Assuming you have a portfolio gain at the end of the year, you can use ChargePoint losses to offset your gains and lower your tax bill on realized gains. Maybe a white knight shows up to buy ChargePoint. Maybe they get new management and successfully execute a turnaround. I wouldn’t bet on either of those events. The most likely event is that ChargePoint shares will go lower and provide a greater loss to write off.
Only you can decide what's right for you and your portfolio. I plan on selling the position because the position in the Stay Invested portfolio is small, and taxes are not a consideration. If you don't need the loss to reduce taxes, you might look for better places to invest and try to recover some of the loss.
SELL CHPT 318 SHARES @ $6.03
"Markets don't go to zero, Portfolio's do.
Buy quality, be patient...and look twice for motorcycles."
- Clay Baker
Stay Invested,
Clay Baker
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Clay's Rules
Rule #1: Don't lose money
Rule #3: Portfolios go to zero, markets don't, Stay Invested
Rule #4: When good stocks you own drop 10% below your cost basis, add shares
Rule #5: Bull markets aren't sustained without the Transports
Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase
Rule #7: When an investment bank sells below book value, buy it
Rule #8: Tips are for waiters. Do your own homework.
Rule #9: Don't sell a stock because you're bored with it. Do your own homework.
RULE #10: Being early and being late is the same as being wrong...move on.
Rule #11: Investing is easy. Waiting is hard; waiting is the hardest part.
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:
AMD, AMZN, AAPL, ARKK, ARKG, CNRG, ENPH, FB, GNRC, GBTC, GLD, HRTX, HD, MSFT, NVDA
I am invested short in these securities mentioned in this post:
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.
