Like several of my InvestorPlace colleagues, I’m fond of what Switchback Energy (NYSE:SBE) brings to the table. The firm is a special purpose acquisition company (SPAC) that’s helping ChargePoint become a publicly traded name. But is the current enthusiasm about SBE stock worthy of it climbing over 70% in the five trading days ending on Nov. 24?
Probably not. However, when investors come across a hidden gem like ChargePoint, it usually doesn’t stay hidden for long. Still — although many SPACs carry a hefty risk premium — for a brief moment, SBE looked to be the exception.
That all changed last week.
The Tweet That Put a Charge in SBE Stock
I know that many of you have probably heard about the bearish tweet from Citron Research regarding Blink Charging (NASDAQ:BLNK). The tweet essentially accused Blink of being a fraud:
“New most ridiculous EV stock is $BLNK. No $$ for R&D, management accused of securities fraud, no real revenues. Expect a massively diluted deal soon so management can continue to deceive public. This should trade right back to $10 where it is still overpriced. Total scheme[.]”
And of course, once that happened, the real fireworks started for SBE stock. It doesn’t make the stock less attractive necessarily, but it does add a risk premium that wasn’t there days before.
The Long-Term Bullish Case Still Holds Up
Regardless of social media, though, Switchback will complete its reverse merger with ChargePoint sometime in December. The new company will be a formidable offering in the electric vehicle (EV) charging space. Right now, however, the EV sector is a gigantic bubble. And there’s some concern that the bubble may be ready to burst.
With a Democrat about to enter the White House, you might be wondering why. It’s because electric cars still carry a premium. And a key reason for that premium is the not-so-little issue of a battery that needs to be recharged.
That’s where ChargePoint comes in. Whenever I write about a company like this, I have to remember that living in a small town has its advantages, but being an early adopter of new technology is not one of them. So, to say that our country’s EV infrastructure is in its infancy is not an overstatement.
But ChargePoint believes it will be positioned well enough to build a nationwide network of charging stations. And — while we may still have the better part of this decade to wait for that vision to be fully realized — names like ChargePoint are coming to the table with real, proven solutions. That means there’s still hope for SBE stock.
Herd Mentality On Full Display
SBE stock had nicely doubled over the last month as investors became attracted to the company’s addressable market, particularly since ChargePoint has the opportunity to capture a significant portion of that market.
In fact, right now the company’s only significant competitor is Blink Charging. And it’s a single analyst’s tweet about the prospects of Blink that incited more significant interest in SBE.
When I first wrote about Switchback in mid-October, the stock was comfortably underbought. That didn’t last long. By the time we got to Election Day, SBE was past 50 and moving toward 70 on the Relative Strength Indicator (RSI).
Normally, that’s the time when many investors will start a gentle sell-off. But in this manic market, there’s no such thing as gentle.
That has sent SBE stock into overbought territory. So, once again, savvy investors just can’t have nice things.
Wait For a Good Entry Point
All told, I still like the short-term and the long-term outlook for ChargePoint — the company is providing an essential component to widespread EV adoption.
However, trading at around $29 per share, you should wait for SBE stock to come back a bit. It’s already begun to do so, dropping down from the $35 range. Right now, though, the secret is out and the stock is a little too pricey at this level.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.
