Analysts name 2 stocks to play the $104 billion EV charging industry — giving one 95% upside

Published Mon, Sep 18 20238:50 PM EDT

Public electric vehicle charging infrastructure remains "critical" in driving further EV adoption, said analysts at investment bank TD Cowen. The bank's analysis shows that the number of public charging ports in the U.S. must grow to 1.7 million by 2030 to keep pace with a growing EV fleet. But questions around funding and installation remain. "A ubiquitous and reliable network of public EV charging infrastructure remains critical in driving further adoption to curtail CO2 emissions from the transportation sector," said TD Cowen. "If our estimate of 1.7MM public chargers does manifest … we think the industry would be a healthy one with several winners." The bank concluded that the world will require a "massive and rapid" buildout of charging infrastructure and installation that it estimates would require a total U.S. investment of $104 billion through 2030. Here are some areas that will take up the bulk of that opportunity, as well as stocks that could benefit, according to TD Cowen. Passenger EV charging hardware The bank estimates that $91 billion in investment is required for publicly available U.S. EV charging hardware and installations for passenger vehicles, and another $14 billion for commercial vehicles by 2030. Charging providers such as ChargePoint Holdings , Wallbox , Blink Charging , Tritium , and automation services firm ABB , will compete for those funds in the United States, said TD Cowen. It estimates that of the 20.8 million passenger ports it expects to be installed by 2030, 83% will be home chargers, while the rest are set to be public ports — at workplaces for instance. However, the public ports will take up the bulk of the investment (76%), thanks to higher power needs and complex installations. Heavy-duty fleets An extensive network of public charging infrastructure for trucks is also needed, said TD Cowen, which estimates that commercial heavy duty vehicles will account for 6% of total charging demand by 2030. That separate network is needed as such fleets will cause intense energy spikes on the grid, which today's power grids are unable to handle, said the bank. "Ultimately, we think the next wave of EV charging companies will have a keen focus on the fleet /medium/heavy-duty sector," it said. It highlighted names that could benefit: Gage Zero, WattEV, TeraWatt, Voltera and Greenlane. They're not publicly listed, however. Software TD Cowen estimates that the market for charging software and warranty could reach about $6.6 billion in the U.S. by 2030 — a growth of about 31% CAGR (compounded annual growth rate) from 2022. That will be driven by rising demand in areas such as re mote monitoring and maintenance. Such software can track charging throughput, overall usage, connectivity issues, payments and others, according to the bank. Those services will be directly related to increased charging demand, which the bank expects to grow at 41% CAGR in the same period. Passenger electricity sales The market for selling electricity to passenger EV drivers is set to grow to $18.2 billion by 2030, with 73% coming from public fast ports, TD Cowen estimates. EVgo , Blink , Electrify America and others will likely have to compete for that pie with Tesla, which has the largest DC fast network — a charging network — in the U.S. and is beginning to open it, said the bank. It noted, however, that many locations may give away electricity for free as supermarkets, retailers and other venues look to attract foot traffic rather than monetize drivers. Top picks Overall, TD Cowen said, ChargePoint remains its top pick given its hardware and subscription-based model, first mover advantage and an "impressive" customer list. It gave ChargePoint an outperform rating and a price target of $11, or around 95% upside. "Minimal capex is required in the ChargePoint business model as the company relies on its commercial, hospitality, parking, fleet, and other customers to effectively crowdfund the buildout of EV-charging infrastructure," said TD Cowen. "This capital-light plan also attaches software to every charging station sold with a nearly ~100% attach rate, offering the company strong visibility into recurring revenue streams." When it comes to operators, it likes fast charging station network EVgo as charging trends improve and it shows "underappreciated operating leverage." It also gave Evgo an outperform rating, and a price target of $6, or potential upside of more than 50%. — CNBC's Michael Bloom contributed to this report.