Switchback Energy (NYSE:SBE) is a shell company, a special purpose acquisition company (SPAC) designed to take ChargePoint public. InvestorPlace writers have been pounding the table for SBE stock for months. Those who have followed that advice have been richly rewarded. This was an $11 stock in mid-September. It opened Dec. 15 at almost $36. The merger is due to close today.
Is it too late to get in? The $1.3 billion market capitalization only represents Wall Street’s interest in ChargePoint. Once the merger occurs, there will be more shares released, both to capitalize ChargePoint and reward its early investors.
It’s true that the fire for IPOs is white-hot after Airbnb (NASDAQ:ABNB) flew out of the gates like Secretariat. DoorDash (NYSE:DASH) Affirmed the move. Will ChargePoint be Justify, or will that be Lyft (NASDAQ:LYFT)?
SBE Stock by the Numbers
The number of Chargepoints has grown by a factor of 10 over the last eight years and should grow another 250% over the next five. In its SEC filings, ChargePoint sees its revenue growing by 15 times during that period.
Our own Louis Navallier sees no reason for the stock to slow down. Unlike most SPACs, like Virgin Galactic (NYSE:SPCE), which are losing money and are hungry for capital, ChargePoint could easily get private capital, given its expected compound annual growth rate of 60%.
Too Far, Too Fast?
In the long run, ChargePoint looks like a great investment. But has it run too far, too fast?
InvestorPlace’s Mark Hake estimates ChargePoint will be worth $3.3 billion post-merger. Revenue in 2026 should be almost $900 million. That means it’s now trading at about 34 times its future EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). Hake sees a 55% post-merger pop in the shares.
The problem is this. As I noted last month, most of ChargePoint’s “stations” are direct conversions of AC power. A Level One outlet will just top your tank overnight. Even a Level 2 outlet, the most common type, takes all night to fully charge.
The big future is in Level 3, which takes DC power and can charge a vehicle in a half-hour. ChargePoint has a plug design called DC Fast. But Tesla has its own design, and most electrics are Teslas. You can adapt a Tesla plug to DC Fast. But if given a choice, most Tesla owners will choose Tesla stations. There are already thousands of such stations at hotels, Tesla dealers and along major highways.
The big money for ChargePoint, in the near term, is in fleet charging. As UPS (NYSE:UPS), Amazon (NASDAQ:AMZN) and the U.S. Post Office go electric, there will be big contracts, and ChargePoint’s scale will matter. It’s just that these contracts have yet to be let, and the company will just be selling hardware, not electricity. In other words, it’s building gas stations, not selling gas.
The Bottom Line
I expect a speculative pop in ChargePoint post-merger, as do most InvestorPlace writers. But the pop could be short-lived. A single tweet can crash a stock in this sector. And Thomas Niel is expecting a pullback.
Tesla is the Apple (NASDAQ:AAPL) of the electric-vehicle market, and its infrastructure the iCloud. You can think of SBE stock as the Android of electric-vehicle infrastructure. But the Android market in electric vehicles has yet to take off. Once speculators realize this, they will sell, leading to a rational valuation for ChargePoint investors.
At the time of publication, Dana Blankenhorn had long positions in AAPL and AMZN.
Dana Blankenhorn has been a financial 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. Follow him on Twitter at @danablankenhorn.