Switchback Energy Is an EV SPAC That’s Actually Worth a Look
This year, there a dizzying number of special purpose acquisition companies (SPACs) going public, many of which have ties to the electric vehicle (EV) industry. Switchback Energy (NYSE:SBE) isn’t among that group because it’s initial public offering took place last year, but SBE stock could prove to be one of the SPAC stars of the EV space.
In the current EV landscape, it’s not a stretch to say investors are looking for the next Tesla (NASDAQ:TSLA) or Nio (NYSE:NIO). That’s human nature. We’re always looking for the next great stock, athlete, consumer fad, etc.
In fairness to many SPACs addressing the EV industry, these blank-check firms conquered one mountain, which is finding a target to bring public. That’s great for their investors and the acquired company. However, many of the EV blank-check deals appear a tad dubious because the target companies aren’t producing vehicles yet. And some aren’t particularly close to doing so.
A manufacturer aspiring to tussle with Tesla actually has to make something to get in the game and flex its competitive muscles.
SBE Stock: A Practical EV Idea
Switchback is acquiring Chargepoint, which could, over time, avail itself to be one of the more viable ideas in the EV investment realm. The reasoning here is simple. Chargepoint won’t be butting heads with manufacturers. It won’t be making electric vehicles at all. Rather, Chargepoint is an infrastructure play. And a pertinent one at that.
The California-based company operates the largest network of EV charging stations – 115,000 to be precise. Think of Chargepoint as the gas station company for a new breed of automobiles. The benefit with that status is that, unlike so many EV SPACs, Chargepoint doesn’t carry the risks associated with a typical pre-revenue company.
One way of looking at Chargepoint/SBE stock is that the former addresses one of the primary concerns associated with EV ownership: Range. Battery technology is evolving and EV manufacturers are prioritizing increased range. However, the manufacturers can’t do all the heavy lifting themselves. Road trips are ingrained in American culture and at some point, infrastructure must evolve to support EV adoption. Enter Chargepoint.
It’s estimated that by 2025, more than 7 million EV charging ports will be needed, but nearly 5 million will be available. Chargepoint is expected to operate roughly half those ports in 2025.
Chargepoint’s revenue growth forecasts reflect the opportunity in the charging infrastructure market. Solidifying its status as the dominant player in this segment, the company estimates revenue will increase at a compound annual growth rate (CAGR) of 60% from 2021 through 2026.
Growth on top of Growth
Last year, EV sales accounted for 2.6% of global auto sales and just 1% of global auto stock, according to the International Energy Agency (IEA). Those are small percentages, but the numbers also imply ample room for growth and the need for more charging ports.
“As technological progress in the electrification of two/three-wheelers, buses, and trucks advances and the market for them grows, electric vehicles are expanding significantly,” the IEA said.
Data confirm that accessible chargers growth is stout, indicating that the speculative nature of many SPACs isn’t a primary concern with SBE stock.
“Globally, the number of publicly accessible chargers (slow and fast) increased by 60% in 2019 compared with the previous year, higher than the electric light-duty vehicle stock growth,” notes the IEA.
Bottom line: the automobile and fossil fuels industries are being disrupted and with that disruption comes compelling opportunity for investors. Chargepoint is one such opportunity and its importance in the EV ecosystem could prove alluring over the long term. It’s a growth name to be sure, but in this arena, Chargepoint is a staple, not discretionary, removing vulnerabilities auto sales and economic data.
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.
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