How High Could QuantumScape Go?

After the company’s IPO in August 2020, shares rocketed over $114 in early 2021. But investors gradually lost faith in QuantumScape since that high-water mark.

But things might be turning around. Since the stock hit a low of $5.11 earlier this year, QS has bounced back in the last few months and is up over 145% year-to-date.

The sell-off started because investors were disheartened by the time it took to get QuantumScape’s batteries to the market. And the company still has no sales or earnings to speak off. Even more alarming were concerns about QuantumScape’s ability to scale production to meet the projected demand.

But the company has proven many of its doubters wrong. QuantumScape production is ahead of schedule by a year. And the company has continued to leverage partnerships with major automakers. A recent deal has given investors hope that QuantumScape’s revolutionary batteries could be charging EVs as soon as this year.

So how high will QuantumScape stock go?

QuantumScape Has a Major Auto Partner

Quantumscape currently has around 800 employees and a market capitalization of $5.89 billion. It achieved a major win with an early partnership with Volkswagen, a relationship that began in 2012.

A 2018 investment of $100 million made VW the largest shareholder in QS. In 2020 the automaker doubled down on its QuantumScape stake with a $200 million investment in the company.

A second-quarter of 2023 announcement about a new partner fueled widespread optimism for QuantumScape. The unnamed partner is a major automotive manufacturer, and it’s agreed to install QuantumScape QSE-5 batteries in its EVs as soon as late 2023. Due to the company’s long history with VW, many believe that Volkswagen is the unnamed partner in this new deal.

QuantumScape Is Disrupting Legacy Battery Tech

Lithium-ion batteries have been the standard for use in EVs, but the technology is reaching its limits. That’s why QuantumScape developed solid-state lithium-metal batteries that can deliver more energy, faster charging times, and longer battery life. These batteries are also less expensive and are a safer alternative to lithium-ion batteries.

The QSE-5 is the company’s flagship product. This battery can be charged from 10% to 80% in 15 minutes. The product’s name is derived from its electric charge rating of ~5 ampere Hours (aH). QuantumScape is also working on a larger form factor of the QSE-5 which will offer even more benefits.

The company’s technology is widely acclaimed, but QuantumScape batteries aren’t in production due to numerous issues that have plagued the company. QuantumScape’s proprietary cell model means that it has to create unique equipment to produce it. And there have even been contamination issues at the company’s production facilities.

But the recent delivery of prototypes to automakers and the announcement about a launch partner for the QSE-5 has allayed some fears. QuantumScape has assured investors it is a year ahead of schedule, with the possibility of ramping up to 1 million deliveries by the end of 2025.

QuantumScape Share Price Leaps Higher

After the company released its second quarter of 2023 earnings report on July 26, shares jumped over 33% to $12.84. But the enthusiasm for QS was driven more by positive partnership announcements and the possible onset of production than it was by the company’s financials.

QuantumScape doesn’t currently have revenue or net income, and the company had $124 million in operating expenses in the 2nd quarter. That raises concerns that QuantumScape won’t have enough cash to fund operations until revenue from the QSE-5 launch comes in. As of the 2nd quarter, the company had $900 million in liquidity.

The lack of sales or earnings also makes it harder to gauge whether the stock is overvalued at a price point of around $13. Without those financial markers, investors are left to speculate on the future outlook for QS.

Analysts Are Pessimistic

The uncertainties around the stock have made many analysts reluctant to endorse it. Out of 8 analysts who have rated the stock, there isn’t a single Buy rating. Five analysts believe the stock is a hold, and three analysts believe it is a Sell.

The most bullish estimate for the stock has it dropping 24.6% to around $10 over the next 12 months. The median forecast predicts QS shares will drop more than 50% down to $6.50.

The most bearish forecast estimates that the stock will bottom out at $2, an 84.9% drop, over the next 52 weeks.

Can QuantumScape Stock Go Higher?

QuantumScape is a battery manufacturer with a product that could disrupt a rapidly-growing industry. After production setbacks caused many of its initial investors to tune out, there are some very positive recent announcements for the company. Prototype deliveries, a new partnership deal, and an imminent ramp-up to production have brought many investors back.

But the company still doesn’t have revenue, earnings, or a clear date on when production will begin. While those are significant concerns, QuantumScape has plenty of cash to keep it afloat until sales pick up. And it’s got the backing of Volkswagen.

Wall Street analysts clearly believe that QS’s recent run-up went too far, and the stock is due to come back to earth. But the stock traded over $100 a few years ago, so it’s clear that there’s still room to increase. If QuantumScape shows definitive progress toward production next quarter, the stock could certainly go higher. But at this point, it’s all still speculation.

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