• EVGO had an operating loss of $90 million in 2022.
• EVGo’s growth depends on a mass market for electric cars in America.
• That market is still a few years away. So is EVGo’s potential profit.

EVGo (NASDAQ:EVGO), a car charging company whose stock came public last July through a SPAC (special purpose acquisition company), remains in a holding pattern.

The company lost $5.9 million to 0.09 during 2021, on revenue of $22.2 million. The company’s earnings release emphasizes that losses narrowed from 2020 while revenue was up 52%.

Investors seem unimpressed. Shares rose just 14 cents on the news. The stock opened at $11.50, a market capitalization of $3 billion. That’s 24% less than it opened at July 2, when investors expected the stock to pop. 

July seems like an age ago now.

Waiting for Electrics

EVGo was founded in 2010 and delivered its first charging station in 2011. The company’s 800 EV Fast charge stations claim to recharge an electric car in about a half hour. But, how fast it happens depends on the car. 

With a half-hour to kill for a fill-up, EVGo is seeking station partners who can fill that time. It now has six charging stations at Wawa convenience stores. (You’ll know things are really moving when there are electric charging stations at Buc-ees.) The nearest outlet to me is at a AAA center next to a shopping mall.

There remain two other problems for EVGo. First, there are four different types of charging hardware using the DC Fast standard it emphasizes. That means adapters are essential. Second, the market remains dominated by Tesla (NASDAQ:TSLA), which has its own charging network.

This means EVGo, like rivals ChargePoint (NASDAQ:CHPT) and Volkswagen’s (OTCMKTS:VWAGY) Electrify America, are waiting for a non-Tesla electric vehicle market. The chip shortage is delaying that. I have written that affordability also remains an issue. Nearly all the electrics on American roads are luxury cars.

In the middle market, meanwhile, EVGo will have to compete with customers’ homes, something no gas station worries about. It can take 20 hours to recharge a car on a standard 110-volt circuit. It can take 5 hours-6 hours if the circuit is adapted to 220 volts, outlets often used by washing machines. Most mid-market electrics will run for 200 miles-300 miles between charges. Bigger batteries deliver longer range. But longer range also adds to the car’s weight and cost.

The Runway

EVGo needs to time its expansion to that of the market it’s serving. The company is guiding to revenue of $48 million-55 million for 2022, with over 3,000 stalls operating or under construction by year-end.

The public offering left EVGo with $484 million in cash at the end of 2021, after raising $600 million. The full year’s operating loss came to $90 million. Earnouts, warrants, and a “redeemable non-controlling interest” cut the net loss. The operating cash flow loss was $29 million.

This means if it doesn’t grow too far ahead of the market, EVGo has enough cash for five years of operations and growth. That optimism may be why the stock has gained almost 15% since the start of 2022. Tipranks has five analysts following EVGo, with one saying buy it, one saying sell it, three saying hold it and a price target of $12/share. 

The Bottom Line

You don’t have to rush into EVGo stock. But a young investor who won’t need their money back in 10 years might want to accumulate it slowly.

EVGo should remain in a holding pattern for at least the next two years. America’s charging infrastructure can’t grow any faster than its electric car fleet. Fleet buyers like Amazon.Com (NASDAQ:AMZN) will likely build their own infrastructure, as Tesla has for its customers.

For me, the best news in EVGo’s earnings release lies in deals with Toyota (NYSE:TM) and Subaru (OTCMKTS:FUJHY). Both have been slow to move into electrics, but both serve the middle market. Toyota is putting out its first all-electric SUV later this year. So is Subaru. 

It’s when these companies, along with such U.S. car firms as General Motors (NYSE:GM) and Ford Motor (NYSE:F), start building mass market electrics that EVGo stock will go.

On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.