The past few weeks have been rough for EVgo (NASDAQ: EVGO), and by extension, for its shareholders. The stock's now down more than 60% from its late-October peak, and touched a multimonth low just a few days ago.
But the move isn't exactly surprising. President Donald Trump is not as supportive of electric vehicles as many expected Kamala Harris to be. Just hours after his inauguration, Trump cancelled former President Joe Biden's executive order that mandated that half of all new cars sold in the United States be zero-emission vehicles by 2030. This policy shift clearly works against EV companies, including EVgo, which owns and operates a charging network.
And yet, if Mack Hogan, deputy editor of industry news website Inside EV, is correct, the stock's steep sell-off may ultimately prove to be a buying opportunity. As Hogan opined shortly after Trump was elected, "If there's one thing you need to know about public policy, it's that inertia is tough to overcome. EVs are 22% of the auto market in California, electrified vehicles are half the market in China and Europe is pushing ahead. There's nothing the federal government can do to stop it."
Here's why you might want to take a stake in up-and-coming EVgo in the wake of its share price plunge.
With a market cap of only about $1 billion, EVgo is certainly no Tesla. It's not even kind of like Tesla. Rather than making electric vehicles, EVgo manufactures and manages public EV charging solutions. As of the end of September, it was operating around 1,100 fast-charging stations across 40 U.S. states, serving over 1.2 million EV-owning account holders.
That's still not a lot. As The Motley Fool's research points out, as of January, the United States was home to 69,632 electric vehicle charging stations, collectively supporting over 195,000 charging ports. ChargePoint currently dominates this arena with nearly 38,000 stations and almost 68,000 chargers. Tesla has just under 7,000 stations, but its individual stations can serve far more vehicles simultaneously than ChargePoint's can. No matter how you slice it, EVgo is a relatively small player in this business.
Don't let that deter you, though. Despite Trump's apparent disinterest in encouraging electric vehicle sales, there are a couple of related reasons this stock is a buy now.
First, electric vehicle purchases are still increasing, and are likely to keep doing so for the indefinite future.
You might have heard that EV sales are slowing down, but what's been slowing is the growth rate, which fell from nearly 50% in 2023 and 66% in 2022 to only 7.3% last year, according to Cox Automotive's Kelley Blue Book.
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This slowdown is understandable, though, as we're past the point when production capacity and EV availability were newly soaring. The debuts of several new EV models during that earlier time helped bolster those growth rates a great deal.
Last year, domestic EV sales set a record at an estimated 1.3 million units. Moreover, overall new car sales of all types only rose by 2.2% to roughly 16 million, according to numbers from Wards Intelligence.
So EVs are pushing through an industrywide headwind -- at least in the U.S., where EVgo presently does all of its business. This continued growth supports the forecast by Cox Automotive that (despite policy-prompted challenges) electric vehicles will account for 10% of domestic new car sales in 2025, versus 7.5% in 2024.
The second reason EVgo could end up faring far better than the market seems to expect is that most of its charging stations offer direct current fast charging (DCFC), which can charge a fully electric vehicle to 80% in 20 minutes to 1 hour, compared to several hours with alternatives. (Most plug-in hybrid electric vehicles don't work with fast chargers.)
Credence Research predicts the domestic EV charging station market will grow at an annualized pace of 34% through 2032, led by the direct current fast chargers that EVgo prefers to operate.
Don't misread the message. While EVgo could end up crushing the market, there's a great deal of speculation here. The EV industry is nearer to its beginning than not, making it difficult to predict exactly what it will look like even a few years down the road. EVgo is unprofitable as well, and it's not clear when -- or even if -- that will change. Be sure there's room for such risk in your portfolio before stepping in, and then manage this risk appropriately.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
Meet the Up-and-Coming EV Stock That Could Crush the Market was originally published by The Motley Fool
