Switchback Energy (NYSE:SBE) represents many of the better aspects of two recent trends that markets can’t seem to get enough of, electric vehicles and SPACs. SBE stock is a slight twist on these two trends.
Well, it’s mostly a twist on the spate of SPAC-funded EV stocks in that it isn’t going to use the blank check proceeds to fund the development of an EV. Instead Switchback Energy will fund Chargepoint in going public.
That should interest investors within the mobility, transportation, vehicle sectors among others. Chargepoint looks like a play that should rise in parallel with electric vehicle adoption.
Chargepoint is an EV charging station provider that has existed since 2007. So investors can buy into the future of EV infrastructure rather than simply buying into the newest EV which may or may not come to be.
This is a company that has been “singularly focused on our vision to move all people and goods on electricity” since 2007, according to CEO Pasquale Romano.
A Closer Look at SBE Stock
Switchback Energy stock has witnessed explosive growth since it announced it would take Chargepoint public on Sept. 24. Shares are up 270% since then which indicates that market participants believe in the company’s promise.
The company’s promise is that it will serve as an index for the entire EV economy. Since Chargepoint’s chargers are brand-agnostic that makes a lot of sense. If the company doesn’t over forecast demand and build an excess of charging stations it should correlate to the EV market fairly well.
And the EV market is set for its own explosive growth. Deloitte projects that over the next 10 years EV growth will see a CAGR of 29% globally. That means the 2.5 million EVs sold in 2020 will become 11.2 million sold in 2025, and continue to grow to 31.1 million by 2030.
If Chargepoint can provide the majority of charging for those vehicles, it’s sure to rise.
But Where Is Chargepoint?
Actually, equally importantly to where Chargepoint is, is where it isn’t. Chargepoint’s geographies are in the U.S. and Europe. That Deloitte projection I alluded to also indicates that Europe will account for 27% of the EV market by 2030 and the U.S., 14% by 2030.
That’s great for Chargepoint, but it isn’t in China which is slated to represent 49% of the EV market by that time.
The point is not that Chargepoint doesn’t have bright prospects, it does. In fact it projects 60% CAGR through 2026 which brings it over $2 billion in revenue and near $880 million in profits in 2026.
The point is that it can’t really serve as a barometer for the EV market if it doesn’t serve 49% of it.
Is There Juice Left?
I think there is room left for price appreciation in SBE stock despite their already meteoric rise. There are two reasons that I feel this way.
Firstly, it hasn’t yet gone public. SPACs simply tend to rise at least until their IPO in the majority of cases. Chargepoint and Switchback Energy have yet to announce an exact date for the IPO.
I can’t recall a SPAC that I’ve written about doing anything other than rising up until its IPO. They certainly can go downward quickly thereafter, but they usually appreciate in price.
Secondly, Chargepoint is a company that has been extant for the better part of a decade and a half. It isn’t a company leveraging market enthusiasm for SPACs to bring yet another EV to market.
It’s using market enthusiasm for EVs and SPACs to build out necessary infrastructure in a burgeoning market. I think more investors are going to become cognizant of that simple fact. As a result, SBE stock should rise further.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.