In September 2020, electric vehicle (EV) charging network ChargePoint (NYSE:CHPT) announced an upcoming reverse-merger with Switchback Energy Acquisition, a publicly-traded special purpose acquisition company (SPAC) at the time. On March 1, the new entity started trading as CHPT stock.
Since then, ChargePoint stock is down over 28%, and year-to-date (YTD) CHPT stock has lost about about 46% of its value. The shares are now hovering at $22, and the record high of $49.48 hit on Dec. 24, 2020 seems quite far away.
Charging infrastructure is receiving significant attention in the adoption of Electric Vehicles (EVs). President Joe Biden has also made it his priority to put resources into green infrastructure projects.
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Campbell, California-based ChargePoint, was founded in 2007. It has a commercially focused business that provides hardware and software to help fleet operators manage their delivery vans, buses and cars. ChargePoint currently operates the largest EV charging station network in the world.
With around 70% EV charging market share, it is well ahead of its nearest competitors.
The company has more than 130,000 charging spots globally, and aims to operate 2.5 million charging stations by 2025.
At this point, the post-merger future might feel gloomy for ChargePoint shareholders. Therefore today, I’ll take a closer look at CHPT stock and see what investors could expect in the coming months. It might still take several quarters for CHPT stock to reach its recent highs. If you are not yet an investor, you might regard a decline below $20 as a better entry point into the shares. Long-term, I’m bullish on the company. Here’s why.
SPACs and Alternative Energy Stocks Under Pressure
Investors keeping tabs on SPAC merger news have had a lot to absorb in recent quarters. SPACs offer an alternative to the traditional initial public offering (IPO) to access the public markets. Last year, SPACs were red hot. However, the mood has been changing in recent weeks.
The Defiance Next Gen SPAC Derived ETF (NYSEARCA:SPAK), an exchange-traded fund (ETF) that provides access to recent SPAC deals, began trading in October 2020 around $26.50. On Feb. 19, it hit a record high of $35.08. But now it is hovering at $25.5. In other words, YTD, it is down about 13%.
Meanwhile, EV and alternative energy companies, which were the darlings of Wall Street in 2020, have also come under pressure in the past few months. For instance the Amplify Lithium & Battery Technology ETF (NYSEARCA:BATT), the Invesco WilderHill Clean Energy ETF (NYSEARCA:PBW) and the VanEck Vectors Low Carbon Energy ETF (NYSEARCA:SMOG) are all down 1%, 17%, and 7%, respectively.
Amidst the hype of the past year in SPACs, EVs and alternative energy stocks, it is not always easy to value these relatively new companies. In early March, ChargePoint released its first quarterly earnings as a public company. Revenue in the fiscal Q4 was $42.4 million. A year ago, it had been $43.2 million. Management now expects the upcoming year’s revenue to be between $195 million and $205 million.
Following the release of the results, investors decided to take chips off the table and hit the “sell” button. Yet, the financial health is likely to improve as it takes advantage of Washington’s EV spending plan. The green revolution is growing both stateside and worldwide.
Therefore, infrastructure companies like ChargePoint should see significant revenue growth in the coming quarters. After all, the company has an expanding customer base of more than 4,000 commercial businesses that include over half of the Fortune 500 list of companies.
The Bottom Line on CHPT Stock
The coming months will better show how ChargePoint can build upon consumers’ preference for EVs. I would encourage readers to keep CHPT stock on their radar. With a current market capitalization (cap) of $6.4 billion, the company still has considerable scope for growth.
However, given the increased volatility in the markets in earnings seasons, CHPT stock is not likely to make a new leg up in the coming weeks. At this point, the shares are likely to move in tandem with the other leading names in the EV and alternative energy space, which might also come under pressure. Interested investors could consider waiting for Q1 earnings release, due in early June.
On a final note, if you do not want to commit capital to CHPT stock, you might also consider ETFs that focus on SPACs, EVs, or alternative energy businesses. In addition to SPAK, BATT, PBW, and SMOG, other examples include the Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV), the iShares Global Clean Energy ETF (NASDAQ:ICLN), or the SPAC and New Issue ETF (NYSEARCA:SPCX).
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.
