Just hours ago as of this writing, Switchback Energy Acquisition consummated a reverse merger with the electric vehicle charging station company now known as ChargePoint Holdings Inc. (NYSE:CHPT). And for those in on CHPT stock, the news was hailed as historic. At least if you read the company’s March 1 press release: “ChargePoint Becomes the World’s First Publicly Traded Global EV Charging Network.”
Look. Let’s get real. You ready? Greasy armadillo. There. I have now become the first writer in the history of InvestorPlace — or any investing publication, period — to use the phrase “greasy armadillo” in market coverage. In fact, I just did it twice. In the same paragraph, no less! Which means: Take self-congratulatory spin from newly minted public companies with a grain of salt the size of Kanye West’s ego. Or mine: There’s room enough in there for everybody.
As I’ve written before, not everything with “EV” stamped on it deserves a triple-digit percentage run-up. Nor does every company within this burgeoning sector deserve our trust. I think I’ve used the word “disgraced” and Nikola Corp. (NASDAQ:NKLA) about 231 times now. So where does ChargePoint and its CHPT stock sit within the universe of public EV companies vying for our investor dollars? Let’s pull up to the pump and fill ’er up with unleaded AC.
CHPT Stock and Its Sticking Points
A special purpose acquisition company or SPAC created what we know know as CHPT stock. And over the last year in the EV sector, these capital-raising vehicles have been almost as ubiquitous as electric vehicles themselves. Four high-profile ones created Fisker, Inc. (NYSE:FSR), Lordstown Motors Corp. (NASDAQ:RIDE), QuantumScape (NYSE:QS) and Hyliion Holdings Corp. (NYSE:HYLN).
Fabulous, right? Not so fast. While SPACs tend to appreciate sharply in anticipation of the reverse merger, they also lead to what I call “SPACulation” (I coined that term, so insert that SPACtacular little trade mark thingy here.)
It’s borderline impossible not to bet on a high-flying SPAC and hope the magic will imbue the new company with financial fairy dust. Yet that’s a fairy tale as stock forecasting strategies go. And certainly, CHPT stock is no exception.
To be sure, Switchback shot up by more than 250% in 2020. And ChargePoint distinguishes itself as one of the oldest and largest electric vehicle charing networks out there. It’s been in business more than 13 years, operates in 14 nations and has some amassed 4,000 business customers.
Yet I’ve written about the pre-public ChargePoint with some skepticism that still lingers. For starters, it’s not profitable. Virtually all EV companies are, though, right? Wellllll … more than a dozen years is plenty long — perhaps too long — to be in what they like to call a “pre-revenue phase.” By comparison, all the above-named EV sector players have been around for a fraction of the time.
What’s more, ChargePoint’s value proposition as a company will face a challenge as new EV energy technologies come on line. Hydrogen, already at use in forklifts, will hit critical mass by 2025. Solid-state batteries, while not currently viable for EVs, show excellent promise. Toyota Motor Corp. (NYSE:TM) and Nissan Motor Co. Ltd. (OTCMKTS:NSANY) are working on their own solid-state technologies with Japanese government backing. There is more competition than perhaps ChargePoint would like to admit. Unless…
Why It May Be Time to Buy
It’s impossible to predict how today’s charging stations will fit tomorrow’s power needs — or not. Then again, maybe there’s room for everyone. To me, it’s like trying to predict which printer ink cartridge will become standard. Of course, none of them have. Or ever will. And so we’ve ended up with 10,000 different kinds, to the frustration of Every Home Printer Owner on Planet Earth.
Investors in CHPT stock have every right to point to the mind-boggling diversity of auto parts as an analogy here. Let’s hope a fuel-diverse universe is how things will tilt for ChargePoint. And yet, how many gasoline fuel types do we have? Just a few. Did ethanol ever catch on? Or diesel cars? Nope. And do people really need charging stations when it’s easy enough to find a wall outlet and call it good?
At this point, just one lonely analyst firm has reached a verdict. They see CHPT stock as a buy. But without consensus, or a meaningful price target to match, whatever you or I should do about this investment boils down — at least to some extent — to educated guessing. At least I guess so.
My call? In this case, I’m looking at the debut of CHPT stock as a reboot of sorts for a privately held company. With stations in Europe as well as North America, and a new deal with Volvo that will expand its market reach, ChargePoint isn’t in any way moving backward. But whether this stock sprints out of the blocks or not, there is another way to measure success in this case.
In short, ChargePoint is maturing. So is the EV sector as a whole. What’s more, I see the current below-$30 mark as an attractive share price. We are on the ground floor. As ground floor as it gets. Neither set to implode or explode, CHPT stock instead looks ideally timed to provide some smart investors with fuel for thought.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.