In mid-December, InvestorPlace’s Todd Shriber recommended three electric-vehicle (EV) charging station stocks. One of them was Switchback Energy (NYSE:SBE). As I write this, it’s trading near $40. That’s 300% higher than its July 2019 initial public offering (IPO), which suggests SBE stock might not be the best bet of the threesome.
Here’s why.
If you follow the EV market, you’re probably familiar with Blink Charging (NASDAQ:BLNK) and Newborn Acquisition (NASDAQ:NBAC), the two other EV charging station stocks Shriber recommended.
If you’re not, let me give you the Readers Digest synopsis of all three companies.
SBE Stock Awaits Merger Vote
Switchback Energy is a special purpose acquisition company (SPAC) that raised $300 million in its IPO to combine with an energy-related company. It found its target, ChargePoint, in November 2020. The firm has one of the largest EV charging networks in the world. Its asset-lite business model has plenty of room to grow ChargePoint locations in North America, Europe and the rest of the world.
The vote by SBE shareholders is scheduled to happen on Feb. 11. As I write this, the $2.4-billion tie-up has not happened. Trading near $40, a “no” vote would most certainly put major downward pressure on its stock. The next time I report on its stock, investors will have heard the decision and made their bets based on the vote outcome.
Blink Charging has been around since 1998. It runs over 23,o00 charging stations, many of which are part of the Blink Network, allowing EV drivers the opportunity to get a charge virtually everywhere in the U.S. It recently deployed its first charging station in New Hampshire at the Windsor Hill Condominiums in Waterville Valley, providing EV drivers with the only charging station within 30 miles.
The third and final company, Newborn Acquisition — a SPAC run by two Chinese investment managers — raised $50 million in a February 2020 IPO. InvestorPlace’s Josh Enomoto said on Jan. 19 that the SPAC’s merger with Nuvve Corporation could catapult the vehicle-to-grid (V2G) technology into the mainstream.
Enomoto suggested that the ability to return electricity to the grid at times of stress due to high demand through dormant EVs is an extra incentive for switching from a vehicle powered by an internal combustion engine.
Interesting.
Which Is the Best Buy?
Shriber doesn’t say which of the three he would buy. At $40, the potential competition that ChargePoint faces from Tesla (NASDAQ:TSLA), Volkswagen (OTCMKTS:VWAGY), Blink, and the many other charging station networks that exist in North America make its current valuation almost picture-perfect.
And that doesn’t include all the gas stations expected to add EV charging stations to many of their gas stations. It’s going to get crowded in a hurry. Until ChargePoint can demonstrate a tangible difference in its network that sets it apart from the rest, lacking profits will make it harder for the share price to keep moving higher.
In January, I wrote that I thought SBE stock was a better buy in the $30s.
“While I think SBE stock could revisit the $30s post-merger, if you haven’t bought yet and are an aggressive investor, I would buy a half position now and hope, like Warren Buffett does, that it corrects in March, April or sooner,” That was on Jan. 14.
“Long-term I think SBE/ChargePoint will be a winner, but we all know there are no guarantees in life, so govern yourself accordingly. And definitely don’t bet money you can’t afford to lose.”
Of course, if the Feb. 11 vote fails, a good buy in the $30s becomes a bad buy in the $20s.
So, until investors get some clarity on Switchback Energy’s merger vote, I don’t think investors should touch it at current prices.
That Leaves BLNK and NBAC
Newborn postponed its own vote to approve the Nuvve combination to Feb. 18 to allow for as many shareholders as possible to vote on the proposed merger. It’s hard to know if the delay was purely to provide good governance or management felt the majority of votes needed might not have been a sure thing.
We won’t know for sure until Feb. 18.
In the meantime, my InvestorPlace colleague, Mark Hake, wrote at the end of January that he felt NBAC shares were worth $34.50 a pop, almost twice where they’re trading today.
If I had to buy one of the two charging station stocks, assuming a “yes” vote for the ChargePoint combination, I would go with SBE.
Based on valuation, among other factors, I think NBAC is the better near-term call. But I still like ChargePoint’s chances, long-term.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.