Not too long ago, I offered a very strong buy recommendation for next-gen, solid-state battery maker Quantumscape (NYSE:QS). At the time, QS stock was trading at $65 and change.

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Five days later, the stock shot up to its all-time high price of $132.73. But to be honest, I think I got lucky with that call. Hopefully, people had the foresight to take profits as the share price soon fell sharply.

I’m not prepared to flip bearish on QS stock, but there’s a serious issue with the bull thesis that I’d like to point out. Plus, there are technical price-related considerations that suggest a cautious outlook for the stock.

So, there’s no need to dump your shares of QS and run for the hills if you already own them . Still, it’s important to see both sides of the issue  — the good, the bad and the ugly. That way you can make an informed investing decision.

A Closer Look at QS Stock

Before QS stock was available to the public for trading, investors could have taken an indirect stake in Quantumscape through shell company Kensington Capital and KCAC stock. Eventually, Kensington merged with Quantumscape, KCAC vanished and QS soon commenced trading with heavy daily volumes.

We’ve seen this story with other special purpose acquisition company (SPAC) stocks, too. Before the merger is announced, the share price remains low and barely moves at all. After the merger announcement, though, the price catapults upwards.

I already mentioned that the stock rocketed up to $132.73, but that Dec. 22 peak was short-lived. Unfortunately, the stock finished 2020 at the much lower price of $84.45.

Then, on the afternoon of Jan. 4 –the first trading day of 2021 — it plunged to below the $50 area. Clearly, the bulls aren’t in control of the price action.

And so, QS is a stock that went very high but then quickly turned around and started falling like a rock. Personally, I would prefer to own a stock that’s just starting its journey upwards.

The Apple Factor

QS stock looks like it might have gone too high, too fast. Now, it’s coming back down to a more reasonable valuation. That being said, though, it’s undeniable that it could move higher as Quantumscape remains a highly buzz-worthy company.

However, investors should bear in mind that this isn’t the only company generating interest over its electric-vehicle-friendly battery designs.

To much fanfare, Apple (NASDAQ:AAPL) announced recently that it’s planning to release its own electric car and battery. With a target release year of 2024, the new car will reportedly be a self-driving vehicle with an innovative “’monocell’ battery design.” This development could reduce the cost of batteries while also increasing the vehicle’s range. And, as big as Quantumscape has become, it’s no match for Apple’s enormous capital and resources.

The Bigger Problem

That’s a serious potential issue, no doubt. Yet, I wouldn’t even consider the competition from Apple to be the company’s greatest concern right now.

Rather, I’d say that Quantumscape’s planned timeline for production will create problems for the company and its stakeholders. Currently, the firm isn’t expected to commence production of its solid-state batteries until 2025. The company’s founder, Jagdeep Singh, recently commented on the issue, “Unfortunately it takes a long time to get batteries into the market, we have to scale up productions and build technologies.”

Of course, that’s understandable. But the EV market is moving fast and won’t wait for anyone or any company. As such, folks who buy QS stock today are making a wager that might not pay off for several years — if it pays off at all.

Bottom Line

There was a breathtaking run-up in QS, no doubt about it. However, ill-timed investors might find themselves on the wrong side of the trade now.

Could Quantumscape’s battery technology be a game changer? It’s certainly possible. But the years-long production wait time could allow the competition to pull ahead. That’s a problem that holders of QS stock can’t afford to ignore.

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