One of the more notable names from the 2020 electric vehicle (EV) special purpose acquisition company (SPAC) craze, Switchback Energy (NYSE:SBE) jumped 19.2% in December, including a late-month pullback. Some of those losses are already being reclaimed as SBE stock is higher by 5.74% to start 2021.
Switchback is still a SPAC, but its merger agreement with EV charging station provider ChargePoint is priced into the shares. SBE stock is effectively acting as a proxy on ChargePoint until the target officially becomes a publicly traded entity.
Much of the ebullience – and a lofty valuation – ascribed to SBE stock is politically driven. For months now, nearly every asset with even a small tinge of being legitimately tied to renewable surged on expectations that Joe Biden would win last November’s presidential election. Obviously, Biden is the president-elect. Adding to the momentum for clean energy stocks, including Switchback, was a sweep by Democrats in the Senate runoff elections in Georgia.
Near-Term Energy for SBE Stock
In the green energy community, expectations are high that the Biden administration will be historic in its approach – and spending – when it comes to combating climate change and making the necessary investments. Those expectations were only ratcheted up on the back of the results in Georgia.
Regardless of the issue, one thing that is truly and consistently bipartisan is politicians paying lip service to an issue du jour. The other thing that’s bipartisan and unfortunately consistent is broken promises. Some of the climate activists and groups that supported the Biden campaign and congressional Democrats already have the party on the clock. They want rapid action on the $2 trillion of green energy investments Biden pledged on the campaign trail.
This is a legislative priority for Biden. The priority grows with the economy still on shaky ground due to the novel coronavirus. However, Democrats’ Senate majority is razor-thin – the majority is attributable to the vote of Vice President-Elect Kamala Harris. That means the votes of centrists from both parties, some of which hail from states with significant fossil fuels exposure, take on added meaning.
A Relevant Lesson for Investors
The lesson in current affairs/political science is relevant for investors considering Switchback. The political catalyst is priced into this name. There’s probably more chance for disappointment from Congress than significant upside surprises.
That doesn’t mean the case for ChargePoint is waning. There’s still a compelling opportunity set ahead of the company. One of the more practical elements of the Biden green energy plan is building 550,000 charging stations across the U.S. over the next decade.
Obviously, this is an objective best left to private industry, including ChargePoint/Switchback. It’s also one that the White House can get moving on straight away. That’s because one of the easiest ways to get more drivers to buy EVs is to remove one of their primary concerns, that being where to stop to charge up while on longer road trips.
Another point in favor of SBE stock is Biden’s pick for energy secretary: former Michigan Gov. Jennifer Granholm. The Wolverine State is home to legacy automakers General Motors (NYSE:GM) and Ford (NYSE:F). Granholm was successful in procuring funding to help those companies and others work on EVs. This confirms she’s on board with the EV movement.
Points to Remember with SBE Stock
It’s easy to get wrapped up in political fanfare with renewable energy equities. In the case of Switchback, it’s easy to fawn over SPAC fanfare.
However, there’s a strong foundation here for long-term investors. This includes the fact that ChargePoint is an established company. And it is financially sound enough that it doesn’t need the cash it’s bringing in from the Switchback merger.
Add to that, revenue is poised to jump to $1 billion by 2024 and double two years after that. Perhaps the most numbers are 2.6% and 14%. Last year, EVs represented just 2.6% of global auto sales, but that figure is forecast to surge to 14% by 2030. And that’s music to the ears of SBE stock investors.
On the date of publication, Todd Shriber did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Todd Shriber has been an InvestorPlace contributor since 2014.
