I don’t like most of the electric car companies that emerged in the wake of Tesla (NASDAQ:TSLA). Switchback Energy (NYSE:SBE) and SBE stock is an exception.
Switchback is a special purpose acquisition company (SPAC). It is designed to take ChargePoint, which produces electric vehicle charging equipment, into the public market.
Think of ChargePoint as the gas station of the electric vehicle revolution.
ChargePoint was founded in 2007 to sell networked charging hardware and services to fleet owners. It now has 4,000 customers and more than 115,000 charging ports. It manages another 133,000 through roaming contracts.
This has given the company an early lead in the electric vehicle charging market, It claims a 44% market share.
The Opportunity
Vehicle charging is a fast-growing market, with several segments.
Most ports are simple conversions of AC wall power to partly charge a vehicle overnight. Most of the chargers you’ll see on the street are called Level 2. These can fully charge a vehicle overnight, or top your charge up while you’re going around town. ChargePoint is the leader in Level 2.
Then there are Level 3 chargers that can charge a vehicle in a half-hour. ChargePoint calls its Level 3 charger DC Fast. It uses DC power. Each type of charger also uses different plugs. Tesla cars carry a custom Level 3 plug, but it offers adapters for other types of Level 3 chargers and for Level 2.
The initial opportunity is in hardware, and that’s where the market is now. But it won’t always be there.
Companies are still signing alliances with car makers and fleet owners. As large enterprises like UPS (NYSE:UPS) and Amazon (NASDAQ:AMZN) switch to electric delivery vehicles, there will be huge contracts where scale will matter. Over time service, software and maintenance all create huge revenue streams.
Thus the “hockey stick graphs,” showing enormous growth over the next several years, are out in force for the sector. A market worth $1.7 billion last year could be worth $18.5 billion in six years.
Follow the Smart Money
A lot of smart money is also backing ChargePoint.
Former oil magnate Kyle Bass, who now runs a hedge fund called Hayman Capital, recently bought 9% of the SPAC taking ChargePoint public. He sees electrics taking 10% of the car market by 2025, and a third of it by 2030. A private funding round worth $226 million attracted such companies as Kleiner Perkins.
There is competition from companies like Switzerland’s ABB (NYSE:ABB), Schneider Electric (OTCMKTS:SBGSY) of France, Eaton (NYSE:ETN), and Germany’s Siemens (OTCMKTS:SIEGY). Most are focused on hardware sales and are large conglomerates.
Chargepoint is focused on electric vehicle charging and takes a holistic approach. It should also have the capital to grow at what Bass calls “ludicrous speed” thanks to the SPAC deal, which values it at $2.4 billion.
The Bottom Line on SBE Stock
Other Investorplace writers have gotten to Chargepoint ahead of me. They have good things to say.
Louis Navillier suggests you can invest directly in the SPAC, noting ChargePoint could have 2.5 million stations in 2025.
Once ChargePoint’s merger with Switchback is complete, Mark Hake thinks it could be worth 56% more than it is now. Josh Enomoto says you can trust ChargePoint to deliver. Chris Lau says it has the potential to jump 400%.
These are endorsements that should intrigue an investor in their 30s or 40s. You’re on the ground floor of a big trend and you’ve got the market leader.
I think you’re a few years away from the big return, but your patience may well be rewarded.
At the time of publication, Dana Blankenhorn had long positions in AMZN.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn.
