RBC Capital initiated coverage on EVgo Inc. (NASDAQ:EVGO) with a Sector Perform rating and a 12-month price target of $5.00 on the U.S. electric vehicle fast charging company.
“The automotive industry is moving towards electrification, and we believe EVgo is well positioned to benefit from this secular trend,” wrote RBC analysts.
“However, we are concerned that price competition will continue to weigh on margins and pressure project economics,” they added.
RBC and its analysts believe EVGO will benefit from positive secular trends in EV adoption, growing demand for charging infrastructure, and government-backed incentives. However, they expressed concerns that price competition will continue to weigh on margins and affect their projects' bottom line.
Management guided full-year 2023 revenue of $120mm-$150mm. Charging revenue is expected to grow sequentially throughout 2023, while eXtend revenue is anticipated to decrease in the second half of 2023. This decline is due to a shift towards construction-related revenues, with the first half of the year being characterized by higher hardware sales.
Adjusted EBITDA was guided to ($78)mm-($68)mm.
In terms of capex, EVgo messaged that $65.2 million of capex spending in the first quarter of 2023 included prepayment for equipment to meet the needs for the entire year. They expect capex spending in 2023 to be lower compared to 2022, but there will be an increase in the fourth quarter of 2023 to set up stalls for early 2024 operations.
"eXtend" is EVgo's white-label service, complementing the company's primary charging segment. The aim of the eXtend strategy is to seize further growth prospects while avoiding the risks associated with extending the network to locations that fall outside EVgo's core and owned charging network.
Shares of EVGO are down 2.4% in early trading Friday morning.