Last I checked, batteries do not bounce. But in QuantumScape’s (NYSE:QS) case, you have to wonder whether someone swapped out the company’s solid-state battery tech for SuperBall rubber. After making its market debut on Nov. 27, QS stock bounded up 256% in less than a month. Since then, it’s down about 60% from the high, with its trajectory resembling a freefall.
But here’s the thing: two months do not make a track record. By mid-2021, we’ll see for sure whether QS stock settles into some sort of upward groove or if it becomes a pigpen for prospectors who drive up shares, make their money, then slop on out with a happy grunt.
One way to make sense of it all starts with looking at if QuantumScape has something special in its electric vehicle (EV) battery design. And that is no sure thing. Why? Because many competing battery technologies — from hydrogen to standard lithium-ion — already have or covet a stake in the EV marketplace.
QS Stock: Ignore the Science, Listen to the Market
Yes, solid-state batteries have a lot going for them.
For one, these energy cells don’t need liquid, known in the lab as “anode host material.” QuantumScape claims to have spent more than $300 million to develop its technology. As Wccftech reports, that investment has yielded an increased energy density of “88 percent relative to a conventional lithium-ion battery” as well as a “0 to 80 percent fast-charge in 15 minutes.” So, clearly there are some competitive advantages here. Anyone who holds QS stock has got to love that kind of substantive data.
In fact, even computer colossus Bill Gates does. That’s right — even the zillionaire brains behind Microsoft (NASDAQ:MSFT) backs QuantumScape and believes in its breakthroughs.
However, just because solid-state technology is solid doesn’t mean it will enter a ubiquitous state. On Wall Street, its the marketplace — not science — that determines the winner. Those wagering on QS need to keep that in mind.
History even offers us a precedent: the Betamax-VHS videotape wars of the 1970s and ’80s. Betamax was by far the superior format in terms of quality and size. But clever market strategy drove down VHS tape and player prices, making it the winner.
When’s the last time you saw a pile of Beta tapes at a garage sale? Just as I thought. The silence screams volumes. So, while technology is important, it’s not the only factor that will decide QuantumScape’s fate.
The Making of PowerPoints
That said, QuantumScape knows the marketing calculus well — at least to some extent. When Kensington Capital, the special purpose acquisition company (SPAC) that funded QS stock, filed its Form 425 with the U.S. Securities and Exchange Commission (SEC), it bordered on an infomercial.
For instance, the form featured this slideshow, perhaps lifted from a nifty marketing PowerPoint. I see this partly as breathless self-promotion that, for all we know, was done the same way job seekers jack up their resume.
Of course, growth in the solid-state battery marketplace is a near certainty. For instance, Nikkei Asia reported on Dec. 10 that Toyota (NYSE:TM) will introduce the tech in its EVs in prototype form sometime this year. But that’s their technology, not QuantumScape’s.
So, who in the meantime will order these QS batteries? And how many batteries are we talking about, exactly? And when, since you can’t buy them yet to begin with? Again, the silence screams volumes.
Hold Off on QuantumScape
There are two angles, then, to look at QS stock. From one side, the company represents an ideal ground-floor opportunity. When it comes to both making money and tech advancements, Bill Gates is no dummy. At some point, the company’s growth and sales figures may bear this out.
But there are also some sobering factors we need to consider here. For one, Gates isn’t over at QuantumScape headquarters checking out progress every day. Instead, he’s merely thrown a billionaire’s chump change at it. And the company remains unproven. So, unless you’re a market timer with a gambler’s dumb luck, making money on QS demands a long-haul mentality.
Watch me eat my words if QS stock goes up 3000% in two months. But in betting against me, you’d still be betting. Solid-state batteries are nifty, but not yet viable in the EV sector. In fact, QuantumScape has its skeptics. One Seeking Alpha writer cautions that, “[QS] batteries are small and unproven — not yet as big as an iWatch battery, and never tested outside a lab.”
Never tested? Hm. Sounds familiar. So, if it’s batteries you want to invest in, wait for the next sale on alkaline AAAs at your local store.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.