ChargePoint Holdings (NYSE: CHPT) is working to replace the gas station as it builds out a network of electric vehicle (EV) charging stations. As the world shifts from combustion engines to EVs, it is going to need companies like ChargePoint. But you aren’t too late to jump aboard this upstart, though you might want to tread with extra caution if you are considering buying it.

What does ChargePoint do?

On its investor relations website, ChargePoint’s corporate overview section states, “Today, ChargePoint is facilitating mass electric vehicle (EV) adoption as one of the largest charging networks in the world with a strong leadership position in North America and a growing presence in Europe. The company has an established, capital light business model with growth that is directly proportional to rapidly increasing EV penetration.” That description sounds amazing, especially given that electric vehicles are increasingly displacing combustion engine vehicles.

But the hype around EVs isn’t the same as it used to be. Some high-profile EV makers have even gone under or been forced to file for bankruptcy protection. Even EV leader Tesla‘s (NASDAQ: TSLA) shares have lost a third of their value since peaking in 2021. However, that’s nothing compared to the 95%-plus price drop that ChargePoint shareholders have suffered through over roughly the same period.

CHPT data by YCharts

Given the deeply negative investor sentiment, it would be hard to suggest that investors have missed the boat with ChargePoint. The bigger question is whether investors are still too early if they buy the shares today.

It costs a lot to be ChargePoint

In ChargePoint’s own description of itself, it noted that it was using a “capital light” business model. That is because it doesn’t actually own all of the physical assets (charging equipment) that are used to power up EVs. It makes the equipment and sells it, as well as providing services and subscriptions. While there’s nothing wrong with any of that, the fact is that ChargePoint still isn’t profitable. In the first quarter of 2024, it lost $0.17 per share. And, more to the point, it has yet to turn a full-year profit.

CHPT EPS Diluted (Quarterly) data by YCharts

This isn’t shocking; the EV sector is relatively tiny when you consider the size of the combustion engine market. So ChargePoint is still building out its business and will probably be doing so for many years to come. That suggests that there’s a huge growth opportunity ahead and that there’s going to be more red ink as well. It’s worth noting that the company’s research and development costs were larger than its gross profit in the first quarter. ChargePoint can’t skimp on R&D if it wants to remain at the forefront of the EV industry, so don’t expect a profit anytime soon. And keep in mind that after R&D, there are still things like selling general and administrative expenses and interest costs to cover.

Given the massive stock price decline, it seems Wall Street is keenly aware of the risks involved in buying a money-losing stock that is still trying to build out its business in a young industry. That, however, is both a risk and a potential opportunity. If management can pull off its grand plans, operating at scale could lead it to generate huge amounts of cash without having to tie up massive amounts of its own capital.

You haven’t missed the opportunity — if it actually exists

If EVs continue to gain share in the vehicle market (which seems likely), ChargePoint’s business could be a long-term winner once it gains enough scale to be profitable. If you are an aggressive investor who doesn’t mind taking on a risky bet, buying now could make sense. But most investors will probably be better served waiting until the company actually makes money before adding it to their portfolios. The fact is that there’s a real chance ChargePoint doesn’t execute well enough to keep up with the EV market it is attempting to serve.

Should you invest $1,000 in ChargePoint right now?

Before you buy stock in ChargePoint, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and ChargePoint wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $785,556!*