EVgo's Challenges Ahead: Analyst On How Price Competition And Regulatory Credits Could Impact Margins And Returns

RBC Capital Markets analyst Chris Dendrinos initiated coverage on EVgo Inc EVGO with a Sector Perform rating and a price target of $5.

The analyst believes EVGO's strategy positions it to benefit from positive secular trends in vehicle electrification, booming demand for charging infrastructure, and government-backed incentives. 

Dendrinos sees the EV charging network market at a nascent stage and thinks EVGO is establishing itself in the right locations and enhancing a competitive advantage to improve utilization rates amid a challenging competitive environment.

Also, the analyst expects funding from government incentives and partnerships to continue supporting the company's future development.

However, the analyst is concerned that price competition will continue to weigh on margins and pressure project economics.

Also, Dendrinos sees regulatory credits as a significant contributor to margins, but the recent weakness in LCFS pricing has been a headwind. 

Hence, the analyst doesn't expect several EVGO projects to meet targeted return hurdle rates. 

The analyst estimates revenue and adjusted EPS loss of $134.5 million and $(0.47) in FY23, $244.5 million and $(0.38) in FY24 and $331.5 million and $(0.27) in FY25. 

Also Read: 'Alexa, Find EV Charging Stations Near Me': EVgo Unveils Navigation Experience With Alexa

Price Action: EVGO shares are trading lower by 3.6% at $3.61 on the last check Friday.