Why ChargePoint Stock Is Rallying This Week

What happened

ChargePoint (NYSE:CHPT) stock is enjoying a significant valuation boost this week. The electric-vehicle (EV) charging company's share price had risen 16.4% from the previous week's market close as of 1:15 p.m. ET on Thursday, according to data from S&P Global Market Intelligence.

In addition to bullish momentum generally lifting companies with growth-dependent valuations, ChargePoint stock is enjoying strong gains thanks to positive coverage from an analyst. Bank of America's Alex Vrabel published a note on the stock on May 30 suggesting that shares offered substantial upside potential, and investors responded by buying into the charging specialist.

So what

In his analyst note, Vrabel upgraded his rating on ChargePoint from neutral to buy and also issued a one-year price target on the stock of $14 per share. Even with the subsequent rally, the price target still implies roughly 40% upside for the stock.

Vrabel believes that ChargePoint is showing that it can execute at a high level and that the company is on track to benefit from industry and regulatory tailwinds. With its strong market share in the U.S., the analyst sees the EV-charging company moving toward a break-even point for cash flow and becoming less reliant on the need to raise funding from outside sources.

Now what

ChargePoint is scheduled to release its first-quarter results after the market closes today. The average analyst estimate is guiding for the company to post a loss of $0.17 per share on revenue of $128.36 million.

CHPT PS Ratio (Forward) data by YCharts

Even after falling roughly 79% from its lifetime high, ChargePoint still has a heavily growth-dependent valuation. The charging specialist is valued at roughly 4.9 times this year's expected sales. If it continues to gain share and grow with the overall charging market, it could deliver strong returns for patient shareholders, but the stock remains a high-risk, high-reward investment.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.