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Switchback Energy Acquisition Corp. (NYSE:SBE) shares appear to be in no hurry to enter the customary consolidation period after having racked up sizable gains over the past couple of days. As an illustration, the stock has now registered cumulative gains of over 84 percent relative to the closing price of $18.51 on the 17th of November, constituting a record bull run over just five trading days. Moreover, in today’s pre-market trading session, the stock is up another 10 percent.
A number of factors appear to be acting as a tailwind for the high-flying stock. First, as we’ve noted previously, the SPAC Switchback Energy Acquisition and ChargePoint are expected to close their merger agreement before the end of the fourth quarter of 2020. The combined company is expected to have an enterprise value of around $2.4 billion as well as access to a cash pile of $683 million, consisting of $317 million in IPO proceeds and $225 million in PIPE investment from institutional investors. With less than six weeks now remaining in the current calendar year, the euphoria of investors is naturally reaching fever-pitch.
Apart from the imminent closure of the business combination deal, Switchback Energy shares are also benefiting from the solid foothold that ChargePoint currently commands in the EV charging sphere. To wit, ChargePoint is currently one of the largest EV charging service providers in the world, with over 4,000 partner businesses and organizations offering 115,000 unique charging points. Moreover, the company also offers access to an additional 133,000 public charging points through network roaming integrations across North America and Europe. Bear in mind that ChargePoint employs a CAPEX-light approach to building a charging network. Rather than establishing its EV charging points from the ground up, the company simply sells host businesses and organizations the necessary charging hardware – including AC level 2 to DC fast charging equipment – in order to electrify parking spaces. The resulting charging network is integrated via a mobile app.
This nimble approach certainly seems to have been successful as ChargePoint currently accounts for over 73 percent of the L2 charging network in the United States. Moreover, With EVs expected to account for around 30 percent of new vehicles sold in the U.S. and Europe by 2030, ChargePoint’s Total Addressable Market (TAM) is expected to continue to grow in tandem as well.
Of course, Citron recently delivered a fresh jolt of optimism when the research house advised its audience to abandon Blink Charging in favor of ChargePoint, thereby setting the stage for this week’s rally:
For all $BLNK investors who are naïve, for same mkt cap of $BLNK you can buy ChargePoint $SBE with 73% market share, considering mkt penetration $BLNK should be at $1 per share. Consider $SBE spent $70mil on RD and $BLNK $0 pic.twitter.com/nfXGj42Iq1
— Citron Research (@CitronResearch) November 23, 2020
Finally, the ongoing effervescent attitude in the broader equity market, which seeks to reward EV players and the companies playing an important role in building an all-electric future, is certainly contributing to Switchback’s recent gains.
Switchback has now racked up over 247 percent year-to-date gains. Given this already sizable rally, the company’s shares remain susceptible to a “buy the rumor and sell the news” type of a move following the consummation of the business combination agreement with ChargePoint. Consequently, some downside protection in this elevated stock price environment may be prudent for investors bearing a high cost base.
