On Monday, Evgo Inc. (NASDAQ:EVGO) shares plunged by more than 7% after Credit Suisse downgraded the stock to neutral from buy, citing valuation concerns. Analyst Maheep Mandloi said the current rally has already priced in the benefits associated with recent announcements.
The analyst thinks the benefits of the infrastructure bill and the company’s expanded partnerships with General Motors and Uber have been baked into the stock price, thus limiting the upside potential. Mandloi also assigned a stock price target of $17.00 per share.
EVGO shares are still up more than 70% this year despite the pullback.
Is it safe to buy EVGO stock?
From an investment perspective, EVGO shares trade at a steep P/S ratio of 304.98, making the stock less attractive to value investors. In addition, although analysts expect its earnings per share to grow by more than 20% next year, the company appears far from swinging to profits based on recent performances.
Therefore, given this year’s gain of more than 70%, the recent pullback may not be enough to create a buying opportunity.
As such, it may be best to monitor the performances in the coming quarters before betting on EVgo’s exciting recovery prospects.
Technically, EVGO shares seem to be trading within a sharply ascending channel formation in the intraday chart. As a result, the stock has skyrocketed to trade deep into overbought conditions.
Therefore, although Monday’s sharp decline pushed the stock closer to the normal trading range of the 14-day RSI, investors could target extended declines at about $14.13, or lower at $11.13.
On the other hand, if the plunge triggers a technical rebound, EVGO shares could find resistance at about $19.14, or higher at $21.60.
There is still time to take profits
In summary, although EVGO shares seem to have declined significantly after the Credit Suisse downgrade, the stock is still up more than 70% this year.
Therefore, given its steep valuation, the current pullback could continue before bouncing back off the key support levels.
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