MORGAN STANLEY INITIATES COVERAGE ON EVGO STOCK WITH $4 PRICE TARGET

Morgan Stanley initiated coverage on EVgo (EVGO) with an Equalweight rating and a $4 price target, citing the company's strong revenue growth (45% in the last twelve months) and strategic partnerships, but also highlighting risks from policy uncertainty and competition from OEMs like Tesla. This assessment aligns with EVgo's recent Q1 2025 earnings, where revenue reached $75.3 million, surpassing expectations, and a narrower-than-expected loss of $0.09 per share was reported, with the company forecasting strong Q2 revenue between $340 million and $380 million.

Analysis

Morgan Stanley initiated coverage on EVgo, Inc. (NASDAQ: EVGO) with an Equalweight rating and a $4.00 price target, suggesting a 7% potential upside for the electric vehicle charging company, which has a market capitalization of $1.15 billion. This initiation acknowledges EVgo's significant 45% revenue growth over the last twelve months and a strong current ratio of 2.27, indicating healthy short-term liquidity, although its high beta of 2.28 points to considerable market sensitivity. EVgo's strategic positioning is enhanced by partnerships with major auto manufacturers like General Motors, Nissan, and Toyota, as well as collaborations with retail chains and ridesharing services. Despite these strengths, Morgan Stanley highlighted key risks, including an uncertain policy environment for electric vehicles and robust competition from original equipment manufacturers such as Tesla. The firm views EVgo's current valuation, at 13.8 times estimated 2027 EBITDA (or 14.9 times on a DCF basis for the $4 price target), as adequately balancing the company's growth potential—with analysts forecasting 37% revenue growth for the current fiscal year—against these risks; InvestingPro's Fair Value analysis also suggests the stock is trading near its fair value. Reinforcing a positive operational trajectory, EVgo reported strong first-quarter 2025 earnings, with revenue reaching $75.3 million, surpassing analyst expectations of $71.4 million, and a narrower-than-expected loss per share of $0.09, compared to a forecasted $0.11 loss. This performance included a 36% year-over-year revenue increase, with charging network revenue growing by 49% to $47.1 million. Furthermore, EVgo's CEO, Badar Khan, expressed optimism with a second-quarter revenue forecast of $340 million to $380 million, exceeding analysts' expectations of $351.8 million. In contrast to Morgan Stanley, Stifel analysts maintained a Buy rating on EVgo with an $8.00 price target. Corporate developments include an expansion of EVgo's 2021 Long Term Incentive Plan by 25 million shares to support talent acquisition and retention.

Key Decisions for Investors

• Investors should carefully consider the divergent analyst ratings from Morgan Stanley (Equalweight, $4.00 target) and Stifel (Buy, $8.00 target) in light of EVgo's strong Q1 2025 results and optimistic Q2 revenue guidance.
• Evaluate the current valuation, which Morgan Stanley suggests appropriately prices in both growth prospects and significant risks such as policy uncertainty and OEM competition, while also factoring in the stock's high beta of 2.28 indicating greater volatility.
• Monitor EVgo's ability to sustain its high revenue growth trajectory, the materialization of benefits from its strategic partnerships, and any shifts in an uncertain EV policy environment or competitive pressures from OEMs like Tesla.