In September 2020, ChargePoint, a privately-held electric vehicle (EV) charging network group, and Switchback Energy Acquisition (NYSE:SBE) ,a publicly-traded special purpose acquisition company (SPAC), announced their upcoming reverse merger. Since then, SBE stock has been been on fire.
On Sept. 24, the day of the merger announcement, SBE stock opened at $12.33. Now the shares are flirting with $45. Put another way,$1,000 invested in the shares back then would be worth more than $3,600 today.
The Street has already shown a keen interest in this merger which is expected to finalize in the coming weeks. If you are not yet a shareholder, you could consider buying the dips in SBE stock, especially if the price goes below $40.
Last year, SPACs became a popular strategy of raising capital and going public. The Defiance Next Gen SPAC Derived ETF (NYSEARCA:SPAK), which gives exposure to recent SPAC mergers, started trading in early 2020. The fund has returned about 20% since its inception.
The International Council on Clean Transportation (ICCT) highlights the need for better infrastructure to help encourage confidence in EVs as a sustainable mode of transportation.
Tailwinds abound for SBE stock as ChargePoint positions itself to provide the infrastructure powering the rising popularity of EVs. And, given the consumer trend toward greener living, they’re only likely to get more popular.
A Growing Company With Global Operations
In 2020, a number of EV companies went public. Investors looking for the next Tesla (NASDAQ:TSLA) were ready to bet their chips on them.
However, most of these SPAC EVs are still pre-revenue companies. In most cases, companies have not even started full production. ChargePoint is different.
As InvestorPlace.com contributor Faizan Farooque recently wrote about ChargePoint’s potential upside. He reminded readers that not only does ChargePoint operate the largest EV charging station network in the world, but that with a 73% EV charging market share it is well ahead of its nearest competitors.
“ChargePoint projects compounded annual growth rates of 60% over the next seven years, exceeding $2 billion in revenue by 2027,” he wrote.
I believe the Street appreciates SBE’s stock’s current market share, niche offering, and potential growth. Hence is the recent run-up in price.
However, 2020 has also shown market participants that the risk appetite makes such momentum stocks extremely volatile, especially in the short-run.
Intraday or over a few trading days, anything’s possible. The ChargePoint deal isn’t closed and SBE stock has not yet started trading as a new entity. Therefore, investors should be ready to embrace swings in price, possibly with a downward bias in the coming weeks.
The Bottom Line on SBE Stock
The future looks bright for the EV and charging markets worldwide. Stateside, the new administration is likely to bring a rising renewable energy tide. Therefore, I am bullish on SBE stock in the long-run. However, the share price has already had a significant run up in the past few months.
Thus, my suggestion is to wait for a potential drop to buy. A decline toward $40 or even below would improve the margin of safety for buy-and-hold investors.
Market participants experienced with options may also initiate covered call positions. For instance a slightly in-the-money covered call with May 21-expiry would offer downside protection. It would also enable investors to participate in an up move.
Finally, investors who are not ready to commit capital into SBE stock fully yet could also consider investing in an EV exchange-traded fund (ETF) in clean energy and EV spaces.
Examples include the iShares Self-Driving EV and Tech ETF (NYSEARCA:IDRV), the Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV), the ALPS Disruptive Technologies ETF (BACS:DTEC), or the Capital Link NextGen Vehicles & Technology ETF (NYSEARCA:EKAR).
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.