On Thursday, EVgo, Inc. (NASDAQ:EVGO) received an upgrade from UBS, shifting from a Neutral to a Buy rating, accompanied by a substantial increase in the price target, which now stands at $8.50, raised from the previous $4.00. The revision follows the recent announcement of a conditional commitment for a $1.05 billion loan from the Department of Energy (DOE), which was disclosed last week.
The UBS analyst highlighted the DOE's conditional commitment as a pivotal factor, providing EVgo with greater transparency regarding the funding of new charging station deployments that could extend beyond 2025. This financial backing is expected to potentially speed up the expansion pace compared to the current projections.
The change in rating also considers political developments, noting that the likelihood of a Republican sweep in the upcoming November elections has diminished, according to UBS Evidence Lab's election probability tracker. This shift is perceived to decrease the investment risks for EVgo.
Key future events for EVgo include the finalization of the DOE loan, forthcoming updates to financial guidance that are anticipated to reflect an enhanced growth trajectory and the achievement of adjusted EBITDA breakeven in the second half of 2025. While UBS anticipates the DOE loan to be finalized in the first quarter of 2025, they acknowledge that a failure to secure the loan could pose a significant threat to their optimistic outlook for the company.
Despite this risk, UBS believes that the established nature of Direct Current Fast Charging (DCFC) technology and the widespread distribution of EVgo's (NASDAQ:EVGO) network help mitigate these concerns. Moreover, the firm expects that EVgo will not require additional equity fundraising to finalize the DOE loan agreement.
In other recent news, EVgo reported a substantial 32% year-over-year revenue increase, surpassing $66 million.
The company has also appointed Paul Dobson as its new Chief Financial Officer, a move that is expected to guide EVgo toward profitability. Additionally, in a partnership with General Motors (NYSE:GM), EVgo plans to install 400 new fast-charging stalls across the United States.
Analysts from various firms have maintained positive outlooks for EVgo. RBC Capital Markets doubled the company's price target from $4.00 to $8.00 while retaining an Outperform rating. TD Cowen upgraded EVgo's stock to a Buy rating and raised the price target to $7.00. Roth/MKM and Stifel retained a Buy rating, and Cantor Fitzgerald increased its price target for EVgo's shares to $5.00.
EVgo has also been enhancing its fast charging network through the EVgo ReNew program, leading to a 115% increase in the number of charging stalls and a growth of over 80% in locations that can serve at least six vehicles. The company is also developing a next-generation charging architecture expected to deploy in the second half of 2026.
InvestingPro Insights
EVgo's recent upgrade by UBS aligns with several key metrics and trends highlighted by InvestingPro. The company's revenue growth of 82.01% over the last twelve months as of Q2 2024 supports UBS's optimistic view on EVgo's expansion potential. This growth trajectory is further reinforced by an InvestingPro Tip indicating that analysts anticipate sales growth in the current year.
The DOE's conditional loan commitment, a crucial factor in UBS's upgrade, is particularly significant given another InvestingPro Tip: EVgo holds more cash than debt on its balance sheet. This financial position, combined with the potential influx of funds, could indeed accelerate the company's charging station deployment as UBS suggests.
However, investors should note that EVgo is not currently profitable, with an operating income margin of -64.97% in the last twelve months. An InvestingPro Tip also warns that net income is expected to drop this year. These factors underscore the importance of the anticipated guidance updates and the goal of reaching adjusted EBITDA breakeven in late 2025, as mentioned in the UBS analysis.
The stock's recent performance has been remarkable, with InvestingPro data showing a 120.62% price return over the last three months and a 239.42% return over six months. This aligns with the UBS upgrade but also raises a cautionary flag: an InvestingPro Tip suggests the stock may be in overbought territory based on its RSI.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for EVgo, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.