The 3 Catalysts That Make SBE Stock a Buy

Editor’s Note: This article was updated on Oct. 19, 2020, to correct the name of ChargePoint Inc. and note that ChargePoint Holdings will be its parent company.

ChargePoint Inc. will have multiple, positive catalysts over the next few years. As a result, longer-term investors should buy the shares of Switchback Energy (NYSE:SBE) stock now.

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Switchback is a SPAC that has agreed to merge with ChargePoint, an operator of electric-vehicle charging stations in North America and Europe. After the merger, which is expected to take place around the end of the year, the stock will be known as ChargePoint Holdings, which will be the parent company of ChargePoint Inc.

Here’s a look at the three strong catalysts that should greatly lift ChargePoint’s financial results over the longer term.

EV Sales Are Expected to Jump

According to one forecast, U.S. EV sales are expected to soar from 383,000 in 2019 to 2.35 million in 2027.

In Europe, the picture is even rosier, as the EU has mandated a 40% reduction of carbon emissions by 2030. To meet the mandate, the percentage of EVs sold on the continent would have to surge meaningfully.

But the EU’s European Parliament has approved a bill to boost the carbon reduction mandate to 60% by 2030. If the Council of Ministers, which represents the EU’s 27 governments, signs off on the bill, nearly 60% of the vehicles sold in the bloc’s countries will have to be EVs by 2030, Bloomberg estimated.

Of course, the tremendous surge of EVs will greatly expand ChargePoint’s potential market. And as one of the largest owners of charging stations in North America and Europe, with a total of over 115,000 charging stations on the two continents, ChargePoint is very well-positioned to benefit from the explosion of EVs.

For its part, the company expect its top line to grow at a huge compound annual rate of 50% to more than $2 billion by 2027.

Tesla’s Competition Will Intensify

Tesla, of course, has its own large network of chargers in the U.S. Right now Elon Musk’s company sells a majority of the EVs bought in the U.S. In fact, in the first half of 2020, the company, which does not allow EVs made by its competitors to use its charging stations in the U.S.,  sold almost 82% of EVs purchased in America. That situation looks bearish for ChargePoint and, by extension, SBE stock.

But, with many other popular auto makers set to release a large number of their own EVs, that situation will almost definitely change in coming years. For example, Ford (NYSE:F) is releasing an electric version of the Mustang next year, while General Motors (NYSE:GM) intends to unveil “20 new electric vehicles by 2023,” including a Cadillac and a Hummer.

Among European automakers, BMW’s i3 EVs should become more popular over time, while Volkswagen (OTC:VWAGY) intends to unveil multiple “affordable” EVs. Finally, Honda (NYSE:HMC) is collaborating with GM to develop two EVs.

As the sales of EVs made by companies other than Tesla jump, creating huge demand for non-Tesla charging stations, Chargepoint’s revenue should surge exponentially.

Technology Improvements

ChargePoint’s fastest chargers currently add just  “40 miles of range in 15-30 minutes.” But Tesla has a Supercharger that can transfer enough electricity to drive 100 miles in just seven minutes. 

Over time, ChargePoint will more than likely develop similar technology. As a result, in the longer term, it will become much easier and more worthwhile for EV drivers to use the company’s charging stations.

Within a couple of years, EV drivers will be able to pull into ChargePoint’s stations, connect their cars to a charger. Then, be able to make a quick call and/or check a website or two for seven minutes, pay, and leave. At that point, the revenue of the company’s charging stations should increase tremendously versus current levels.

The Bottom Line on SBE Stock

As of Oct. 6, the enterprise value of ChargePoint Holdings was expected to be $2.4 billion in the wake of the merger.

Given ChargePoint’s three very powerful positive upcoming catalysts, I expect the company’s annual revenue to reach $2 billion by 2025. This will make SBE worth buying now for longer-term investors.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.

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