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ChargePoint's (NYSE: CHPT) stock hit a record high of $46.10 on Dec. 24, 2020. At the time, investors were dazzled by the electric vehicle (EV) charging network builder's explosive growth rates. But today, its shares trade at less than $2. ChargePoint's stock plummeted as the EV market cooled off, it faced more challengers, it racked up more losses, and rising interest rates compressed its valuation.

Should investors buy, sell, or hold the stock after that precipitous decline?

Reviewing the key facts and figures

ChargePoint is the top builder of EV charging stations in North America and Europe, with over a million charging points. It serves retail businesses that want to attract more customers with EV chargers, residential customers, and companies with fleets of EVs. It went public by merging with a special purpose acquisition company (SPAC) in February 2021, and it set some ambitious growth forecasts for the following five years.

Unlike many other SPAC-backed companies, ChargePoint actually exceeded its own expectations in fiscal 2022 and fiscal 2023. However, it lost its momentum in fiscal 2024 as the sluggish growth of the EV market and the tough macro environment drove many companies to rein in their spending.

ChargePoint generates most of its revenue from its chargers, which it sells at a steep loss, instead of its higher-margin subscription fees. It only generated $507 million in revenue in fiscal 2024, but its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss widened from $217 million to $273 million.

The reasons to buy or hold ChargePoint

ChargePoint faces tough headwinds, but it expects its business to stabilize in the second half of fiscal 2025 as it expands its subscription services, resolves its inventory issues, and grows its manufacturing operations in Asia while the EV market warms up again. It also expects to generate positive adjusted EBITDA in the fourth quarter of fiscal 2025.

For fiscal 2025, analysts expect ChargePoint's revenue to rise just 2% to $517 million as it narrows its adjusted EBITDA loss to $108 million. That growth rate seems anemic, but its stock trades at less than 2 times this year's sales. That low valuation might limit its downside potential until it overcomes its near-term challenges.

ChargePoint has already established an early-mover advantage in the EV charging space, and it could recover quickly as the macro environment improves. Analysts expect its revenue to rise 33% in fiscal 2026 and 21% in fiscal 2027. They also forecast its annual adjusted EBITDA to finally turn positive in fiscal 2027.

The reasons to sell ChargePoint

ChargePoint will struggle if the EV market doesn't recover. Macro headwinds could keep throttling the growth of its commercial vertical, which accounts for nearly two-thirds of its billings, and offset the expansion of its fleet and residential verticals. ChargePoint also faces stiff competition from Tesla's (NASDAQ: TSLA) growing network of Level 3 Superchargers, which are faster than its own Level 2 chargers and compatible with other EVs, as well as pressure from other smaller rivals like Blink (NASDAQ: BLNK). Those challenges could make it tough for the company to meaningfully narrow its losses.

ChargePoint's balance sheet is also a mess. It ended the first quarter of fiscal 2025 with just $262 million in cash and equivalents, while its high debt-to-equity ratio of 2.8 could make it tough to raise fresh cash if its coffers run dry. It's already increased its share count by nearly 40% over the past three years, and it could continue to dilute its investors with higher stock-based compensation costs and more secondary offerings.

Should you buy ChargePoint's stock?

ChargePoint once seemed like a promising play on the EV charging market, but its business model doesn't seem sustainable yet. It needs to install more loss-leading chargers to scale up its business and generate more revenue, and there's no guarantee that it will ever break even as Tesla and other competitors carve up the fragmented market. As a result, I think it makes more sense to sell ChargePoint's stock right now instead of buying or holding it.

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

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.