Take Profits On Switchback Energy Acquisition Stock While You Still Can
What’s the latest with Switchback Energy Acquisition (NYSE:SBE) stock? For the past few weeks, shares have traded sideways between $35 and $45 per share. SBE stock investors are still waiting for this SPAC (special purpose acquisition company) to close on its merger with ChargePoint.
President Biden has moved ahead with electric vehicle-related executive orders. But, it may not be enough to sustain this stock’s “blue wave” gains.
This may explain why we haven’t seen another big move higher for Switchback stock. After the shares’ epic, post-election run, there may not be enough juice left in its batteries.
Even those highly bullish on the EV megatrend have to concede that stocks across this sector have moved up too far, too fast. So far, the many concerns with this “story stock” haven’t done much to affect its performance. But, that could all change in the coming months.
On Jan. 14, I recommended getting out of this stock, while the going was still good. Shares have pulled back since then, from around $44 per share, to around $41 per share. But, with more possible downside ahead, selling into strength remains the best play.
Political News Isn’t Enough to Sustain SBE Stock
President Biden has been issuing executive orders at a breakneck pace. These have included multiple executive orders that could benefit the EV sector. This may be a step in the right direction. But, it’s hardly enough to sustain the current price of SBE stock.
Why? The impact of Biden’s recent executive orders have more of an indirect rather direct impact on SBE stock. For example, none of the orders include anything about his campaign vow to have half-a-million charging stations from coast-to-coast by 2030.
This company, which operates the world’s largest EV charging network, may not be in the running to win all or part of a possible contract to install/operate this national charging station network. But, news of progress would do much more to move the needle for Switchback shares.
If the new administration’s actions on climate change/clean energy continue to be more-indirect positives, it’s going to be tough for this stock — one of the biggest beneficiaries of the “Biden boost” — to hold onto its post-November gains.
Add in existing concerns, and chances are this stock will head lower, rather than head higher, in the coming months.
Other Red Flags Remain on the Table
Besides the risk that green policy changes fall short of expectations, other risks remain at play with SBE stock. For example, the impact of an increasingly remote office environment on this company’s growth potential.
Sure, as we crawl back to the “old normal” and put Covid-19 behind us, demand from office parks for ChargePoint’s stations should pick back up. Yet, if office life becomes permanently a remote affair (even on a partial basis), it could result in this company falling short of its ambitious growth projections.
But, that’s not all. As InvestorPlace’s Josh Enomoto discussed Jan. 29, ChargePoint’s public charging stations sound like a good idea on paper, but could be more complicated in practice to install. In other words, adoption of its stations in commercial and residential settings may take longer than expected.
On top of all this is the risk of competition. The company may tout itself as the world’s largest EV charging network. But, as our own Dana Blakenhorn pointed out Jan. 22, ChargePoint faces much more competition than it lets on. Both Tesla (NASDAQ:TSLA) and Volkswagen (OTCMKTS:VWAGY) are building networks that you can use on any vehicle (with an adapter).
Add all these concerns together, and what do you get? The high possibility this stock falls on disappointment, rather than rallies on better-than-expected results.
Bottom Line: Sell Into Strength (While You Still Can)
The Switchback-ChargePoint merger is set to close later this month. Some may want to buy in now, anticipating another pop once the deal is complete. But, based on how other EV SPACs have performed since their respective mergers closed, that may not be the most profitable move.
What do I mean? After closing its merger deal late last year, Romeo Power (NYSE:RMO), formerly RMG Acquisition, is down from over $30 per share to around $19 per share. QuantumScape (NYSE:QS), formerly Kensington Capital Acquisition, initially skyrocketed post-merger, but has since crashed back to earth.
In short, with all its potential (and then some) priced-in, and its share price holding steady at between $35 and $45 per share, SBE stock could be getting ready to pull back in a big way. With this in mind, take profits now, before its current strength reverses to weakness.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.
