Switchback Energy Takes the Guesswork Out of the EV Sector

One of the reasons why I consistently pounded the table on the Roaring 2020s is not just the emergence of new technologies. Rather, this will be the first time where various innovations integrate into a cohesive and practical whole. Obviously, electric vehicles (EVs) are a perfect example of this dynamic, enabling efficient and environmentally friendly transportation. As such, investors can reasonably expect upside for Switchback Energy Acquisition (NYSE:SBE) and SBE stock.

a chargepoint charging station

Source: Michael Vi / Shutterstock.com

Switchback is among a growing number of special purpose acquisition companies (SPACs). In this case, it will merge with ChargePoint, a popular EV charging station company. Let’s stop right there. Though the underlying business of SBE stock is clearly relevant, many critics of ChargePoint note that competition is fierce. As a “refueling” platform, there’s not much the company can do to distinguish itself.

Yet this alone shouldn’t automatically dissuade you from considering SBE stock. Primarily, the reason is that we’re still early in the game. As the International Energy Agency pointed out, sales of EVs in 2019 increased a dramatic 40% year-over-year. In terms of market share, though, EVs accounted for only 2.6% of global car sales.

If you believe that EVs are the future — and that is the popular consensus — this segment will rapidly take market share from anachronistic combustion cars. Therefore, the EV charging sector is almost guaranteed to increase in scope, benefiting early movers.

More importantly, long-term demand is sure to support SBE stock; the only thing mitigating it right now is range anxiety. According to an automotive survey in 2019, 58% of potential EV customers feared running out of power before being able to recharge. Another 49% were concerned about the low availability of charging stations.

However, as EV infrastructure is built out alongside the EVs themselves, range anxiety should become less of a concern, boosting sales. Because of this, it’s likely that whatever investments ChargePoint makes in expanding its footprint will be rewarded down the line.

SBE Stock Is Ideal for Forward-Thinking Investors

Nevertheless, the discussion over EV expansion and integration currently runs into an unavoidable dilemma: cost. Yes, over time, improvements in battery capacity, as well as economies of scale should help drive down the purchase price of EVs. But for now, they’re out of reach for many middle-income earners.

According to U.S. News & World Report, the cheapest EV you can buy today is the Mini Cooper SE, with a price tag just under $30,000. Granted, this is the pre-federal EV tax-credit price so the out-the-door cost should be lower. However, these credits don’t last forever, presenting a challenge for widescale EV distribution.

Additionally, almost 54% of Americans have an annual household income less than $75,000. To purchase an EV that has reasonable range — the Mini Cooper above only has 110 miles — you really need to be making $100,000 or above. However, only 34.1% of U.S. households are part of this income bracket.

Again, battery tech improvements should make EVs feasible for most drivers. But the challenge here is that these advancements aren’t guaranteed. However, building out more charging stations isn’t exactly rocket science. Yes, it’s a risk but not as much as anticipating the introduction of a gamechanger, such as a viable solid-state battery. Thus, SBE stock is a more practical play on the broader EV rollout.

Additionally, whether EVs decline in price or not, it won’t change buyers’ circumstances. In other words, as automakers begin addressing the middle- to lower-income brackets, these households will be less likely to have their own infrastructure (i.e., a garage) and therefore must depend on public charging stations.

That’s another aspect that’s presently preventing widescale EV adoption: The platform caters to the rich. However, a buildout of charging stations should help ease this pain point, making SBE stock an intriguing proposition.

Selling the Tickets, Not the Wager

Finally, you should realize that while most analysts are bullish on EVs, not every manufacturer will enjoy upside. As I’ve mentioned in prior articles, many companies will make it, but some will not. Admittedly, distinguishing winners from losers is a gargantuan task.

Fortunately, SBE stock takes a lot of the guesswork out of the EV market. Essentially, ChargePoint is the critical cog that will usher in the next wave of EV demand. Buying SBE shares, then, is about selling tickets to the big game instead of placing a wager on which team will win.

Of course, the biggest gains will come from automaker-specific wagers. However, it’s smart to spread out your risk across multiple bets. An organization like ChargePoint will give you reliable exposure to EVs while you figure out your favorite direct plays.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now.


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