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Barriers to entry for smaller competitors including the sluggish EV market and high interest rate environment will be to EVgo’s (NASDAQ:EVGO) advantage, enabling the company to establish a “competitive moat” in the EV charging landscape.
RBC Capital sees this fueling increased profitability for EVgo (EVGO) and upgraded the stock to Outperform from Sector Perform.
The firm trimmed its price target by a dollar to $4 to reflect a more modest topline growth outlook.
“The automotive industry is moving towards electrification, and we believe EVgo is well positioned to benefit from this secular trend,” RBC Capital analyst Christopher Dendrinos said in a note to clients.
Dendrinos sees certain trends like higher utilization rates and throughput per stall from faster charge rates continuing through 2024 with upside potential to the company’s current targets. Investors should also be reassured by EVgo’s (EVGO) expectation to be EBITDA positive in 2025 along with the company’s liquidity position. Although EVgo (EVGO) will need a few more years to achieve a free cash flow inflection point and will need additional capital from outside sources to sustain growth, RBC models positive operating cash flow in 2025.
The firm qualifies its Outperform rating with the expectation that long-term growth for EVgo (EVGO) will be driven by positive secular trends, a large runway of development opportunities, and competitors that are in a disadvantaged cost position.