When I last wrote about Switchback Energy (NYSE:SBE), I advised investors to wait for a pullback before buying the shares. I didn’t say that because I dislike ChargePoint, the company that Switchback is helping bring to market. In fact, I believe ChargePoint is leaning into the future of transportation. But SBE stock seemed overbought, and my opinion about it hasn’t changed since then.
The movement of stock prices prior to and immediately after initial public offerings is, with rare exceptions, volatile. It’s easy for risk-averse investors to sell such shares at the first sign of trouble. However, it’s also common for investors to be overly optimistic precisely when they need to see what’s obvious to everyone else.
It may be a long time before there is a real need for ChargePoint’s infrastructure. But that doesn’t mean the infrastructure shouldn’t or won’t get built. The latter point is the bullish argument for the stock in a nutshell.
And investors can love SBE stock. That doesn’t change the fact that the shares might, just might, be overvalued at this particular point in time. The last year has been difficult, and 2021, at least at the outset, is not promising to be much different.
The Economy Is Not on Solid Footing
Right now, our government is giving many citizens $600 of cash that it does not have. But I’m celebrating that decision. And I hope those most affected by the novel-coronavirus crisis get even more money.
Although I’m not a fan of bloated deficits, it seems to me that the king’s horsemen who knocked Humpty-Dumpty off the wall should be the ones making the omelet.
However this entire pandemic has illustrated our government’s need to walk and chew gum at the same time, as well as its inability or unwillingness to do so.
Right now, it’s a fait accompli that electric-vehicle stocks (pure plays and otherwise) will continue to climb, with the Biden-Harris administration taking office soon. But it would seem that Congress, if not the President-elect himself, will have a few more pressing agenda items than EVs in its first 100 (or 1,000) days.
Is the administration committed to the electrification of transportation? Yes. Is it capable of achieving its ambitious goals? No recent administration has underpromised and overdelivered. There’s your answer.
SBE Stock Is a Bet on Not Looking Back
Talking our electric-vehicle future into existence is not possible. But EVs will be our future. However, that seems to be more because of Elon Musk than anything else. And speaking of Tesla (NASDAQ:TSLA), the company has a network of proprietary charging stations around the country. Moreover, Musk has shown that, in many cases, he’s not inclined to make it easy for competitors to piggy back on his company’s intellectual property.
Dana Blankenhorn, another InvestorPlace columnist, wrote that ChargePoint’s most viable market, at least initially, looks to be the infrastructure for the commercial EV market.
The shares of multiple companies have recently begun to trade on public markets. So ChargePoint is facing a meaningful amount of competition.
Blankenhorn adeptly explained ChargePoint’s outlook with this analogy:
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.
Hang On and Enjoy the Ride
If you’ve already bought SBE stock, you have to know why you did so. As InvestorPlace contributor Will Ashworth explained, if you’re just trying to game the market, you may be sorely disappointed. If, however, you are buying it because you’re a true believer in our electric future, I advise you to stay the course. But as InvestorPlace columnist Faizan Farooque points out, buying and holding the shares of a company that most EV manufacturers will need is not a bad investment.
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 six years. He has been writing for Investor Place since 2019.