Sell-the-news is a common phenomenon on Wall Street. But when it comes to ChargePoint Holdings (NYSE:CHPT), has a case of selling-the-new become unplugged and worth a purchase? Let’s take a look at what’s happening off and on the price chart of CHPT stock, then offer a risk-adjusted determination aligned with those findings.
For a while last year, special purpose acquisition companies (SPACs) were as close to being the proverbial free lunch an investor could possibly find in the market. A blank-check company doing nothing with its coffers announces intentions to reverse merge with an exciting business such as an EV or fintech outfit and presto chango, shares become a dearly-held raging bull.
And for a short time it was easy pickings.
Nikola (NASDAQ:NKLA). Opendoor Technologies (NASDAQ:OPEN). Lordstown Motors (NASDAQ:RIDE). They’re decent enough examples from a tsunami of SPAC offerings in 2020 which rushed higher in the wake of announced deals and even as newly-created companies, too.
But over the past several months and despite the continued popularity, SPACs have grown increasingly challenging as investments as listed companies. Could there simply too much of a good thing? Shares of CHPT suggests as much.
The Story of CHPT Stock
CHPT is the result of a reverse merger with blank check vehicle Switchback Energy. And for a time with shares trading under the old SBE ticker, the stock was a standout trade. ChargePoint gained nearly 400% over roughly three months during the fourth quarter after word of Switchback’s deal with the company.
The fierce rally was even more impressive given the thematic SPAC trade was already showing sure signs of fractures and outright hemorrhaging on dashed expectations and more sinister shenanigans made possible by the looser environment. One-time darling NKLA became the poster child for pulling the wool over investors eyes. More recently, RIDE had similar problems answering more demanding questions to a less carefree investor base.
But ChargePoint was and remains the real deal, right? No fake downhill road tests to promote it’s products, right? True. In fact, CHPT is the largest provider of EV charging stations in the United States with more than 100,000 charging ports. That’s nearly 75% of the market. There’s more, too.
CHPT’s tendrils aren’t confined to the Jetson’s and their boy Elroy or Judy as customers either. Corporate campuses from Salesforce (NYSE:CRM) to Microsoft (NASDAQ:MSFT) are clients as well. There’s also key partnerships with automobile manufacturers. Germany’s BMW is rolling out vehicles with ChargePoint stations integrated into the in-car navigation system. What could possibly go wrong, right?
Despite the dominant position, it’s also a fact shares of CHPT have been cut in half from their December high. The stock was even off as much as 60% earlier this month. And since the newly-arrived and merged CHPT officially arrived on the market March 1, shares have seen their valuation shrink by a full 20%.
So, what’s happened to CHPT and obviously a well-positioned company in a growing market for EVs whose customers clearly need to plug in somewhere? For one, the reality of improving technology and maybe even better non-electric tech on the horizon could be acting as a drag. The wave of SPAC offerings has undoubtedly also resulted in multiple compression for CHPT. It also simply means there’s more publicly-traded choices.
ChargePoint’s competition may not be able to claim top prize for being the largest, but they’re out there. Today among others, there’s Blink Charging (NASDAQ:BLNK) or EVgo’s shell financing company Climate Change Crisis Real Impact 1 (NYSE:CLII) vying for investors’ wallets. I suppose Tesla (NASDAQ:TSLA) should also be included. Not that anyone is buying any of those stocks these days. It’s like having fish in a barrel, but investors are allergic to eating fish.
CHPT Stock Weekly Price Chart
Source: Charts by TradingView
As detailed above, investors have been indiscriminate in “selling-the-new” CHPT stock following its ticker change from SBE. But a nearby buying-the-new opportunity in ChargePoint shares may be around the corner on the price chart.
The provided weekly view of CHPT reveals a stock now in its third week of inside consolidation work. The relative quieting of price action follows a volatile, but bullish hammer candlestick test of its lifetime 76% retracement level. And with an aligned and oversold stochastics indicator supporting a potential key bottom in-the-works, investors should be monitoring shares for a buying opportunity.
Today, my suggestion would be to watch CHPT stock for a purchase decision above the high of last week’s inside candle. Bottom-line though, and in making an acquisition in your trading account, I’d recommend an intermediate-dated and slightly out-of-the-money bull call spread for fully-charged upside with less worry about another unplugging.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.