Now May Not Be a Good Time to Charge Into Switchback Energy

Switchback Energy (NYSE:SBE), which will trade as ChargePoint under the ticker CHPT starting next month, is reportedly the unquestioned leader in electric-vehicle charging. That’s why some feel like SBE stock is a no-brainer investment.

But is it?

As the merger between the special purpose acquisition company (SPAC) and the California-based ChargePoint approaches fruition, that is what investors are being told.

After all, ChargePoint has the largest independent network of charging stations in the world right now. It also has a first-mover advantage in that space, according to Switchback CEO, CFO and Director Scott McNeill. He argues that the sector will be worth $190 billion in 2030 and that ChargePoint will have a huge piece of it.

But will it?

SBE Stock, EV Charging and What You’re Charged

On one hand, ChargePoint does have an expansive network of charging stations. But most of them are so-called “Level 2” stations which use 240-volt equipment to recharge a car overnight. They’re a convenience, providing a few miles of range for EV owners while they’re having meals.

Now, that’s not to say ChargePoint doesn’t make fast chargers. It has its DC Fast chargers. However, out of over 121,000 charging locations, just over 400 have DC Fast equipment, which are branded as Express and ExpressPlus.

What’s more, ChargePoint doesn’t have fast-charging to itself. For example, Tesla’s (NASDAQ:TSLA) SuperChargers have similar capabilities. That network is proprietary, but it can be made to work with other cars. In fact, all a driver seems to need to charge a non-Tesla car with a SuperCharger is an adapter.

To that end, an Australian company called Tritium is offering a work-around, called Plug and Charge. And while that doesn’t work with all cars, there are also myriad adapters, dongles and toll-free numbers to call for non-Tesla EV owners to buy some juice.

That said, the best way to recharge an electric car — even a Tesla — is to do it at home. For instance, a Tesla Supercharger costs about twice as much as electricity at home, making the cost of driving an EV close to that of a gas-powered vehicle.

All this means you need to take ChargePoint’s projections with a grain of salt.  Tesla will be a competitor. So will Volkswagen (OTCMKTS:VWAGY), which has a network called Electrify America as well as stations in Europe. Needless to say, SBE stock is facing much more competition than it lets on.

Room for Optimism

Some investors have been able to recognize the complexity of ChargePoint’s task. Between Christmas and Jan. 4, shares in SBE stock plunged well over 20%. Tyler Craig called Switchback’s decline a golden opportunity and the shares have indeed recouped most of the loss.

However, investors who own or are considering buying Switchback Energy may want to conduct more research on ChargePoint, as InvestorPlace contributor Mark Hake wrote a week ago. The company’s chargers are mostly 120 volts or 240 volts. DC Fast charger run at 480 volts and 100 amps. That’s what’s needed to get that 100 miles of range within half an hour.

Finally, InvestorPlace columnist Todd Shriber says “political catalysts” created the early excitement about SBE and such catalysts aren’t necessarily reliable. Still, he likes that ChargePoint is an established company that doesn’t need the money from its upcoming merger with Switchback Energy to keep growing.

Bottom Line

I want my next car to be electric. Right now, legacy car companies like Ford Motor (NYSE:F) are busy entering the EV market to get into gear against startups like Lordstown Motors (NASDAQ:RIDE) and Fisker (NYSE:FSR).

So, the wind is at the EV industry’s back. However, standards must be established and consumers have to be educated. Electric charging won’t be like filling up at a gas station — and probably not for a decade.

What this tells me is that there will be plenty of dips in SBE stock and ChargePoint to buy. And just because the company has a large charging network does not guarantee that it will win the race.

On the date of publication,  Dana Blankenhorn did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn