EVgo: Federal Funds for EV Fast Charging Begin To Flow; Shares Overvalued

We maintain our $3 fair value estimate for EVgo EVGO following news that the company and its partners have been selected to receive federal funds to build out fast-charging stations in Ohio. The shares reacted positively to the news, up 14% at the time of writing, but we view them as overvalued.

On July 17, EVgo announced that the Ohio Department of Transportation has selected it and its eXtend partners to receive $13.8 million in federal funds (out of a total tranche of $18 million) associated with the National Electric Vehicle Infrastructure program to build out fast-charging stations. EXtend partner Pilot will own 14 of the 20 stations, with the remainder part of EVgo’s company-owned network. Over the next five years, Ohio will release over $100 million in NEVI funds to support fast charging in the state. Nationwide, the NEVI program offers a total of $5 billion toward fast-charging infrastructure to be disbursed over the next five years.

While we view this as an incremental positive, it does not change our financial expectations for EVgo. We stress the relatively modest amount of the award, with the majority of it toward EVgo’s eXtend offering, which we view as less of a long-term value driver compared with the company-owned network. As such, our long-term financial expectations are largely unchanged.