Today, investors are seeing some pretty incredible momentum in electric vehicle (EV) and battery stock plays. Investors in QuantumScape (NYSE:QS) and QS stock have reaped the benefits of the move this broader group has made today.
This company, which works on developing solid-state batteries at commercial scale, has been embattled this year. Since peaking above $130 per share late last year, QS stock has slowly disintegrated. Today, investors can pick up shares of this innovative battery company at under $25 per share.
Why?
Well, a high-profile short report has been issued against QuantumScape. Short seller Hindenburg Research has challenged the actual technological claims of QuantumScape. Indeed, the report implies QuantumScape is much further away from commercial production of solid-state batteries than they suggest. Allegations around misleading disclosures and the science behind the batteries has led to some rather intriguing back and forth between the company and skeptics.
However, today, it appears QuantumScape is getting some love from Wall Street. A positive report on QuantumScape from analysts at JPMorgan (NYSE:JPM) suggest perhaps the potential reward is worth the risk with QuantumScape.
Let’s dive in a bit more.
JPMorgan Boosts QS Stock Today Via Analyst Report
Today, JPMorgan initiated coverage on QuantumScape. The investment bank assigned a rating of “neutral,” in line with other analysts on this stock. Currently, the consensus on QuantumScape stock is a hold, with an average target price of $34.
JP Morgan’s coverage appears to be in line with the Street in many respects. The report is supportive of the potential breakthrough solid-state batteries could provide. By replacing a polymer separator in traditional batteries with solid-state material, battery development could become less costly and more efficient. However, like other analyst reports, concerns around the commercialization of this potential technology has led to a neutral outlook.
I think this sort of sentiment is spot-on. Sure, QuantumScape may have produced a small-scale prototype that works in theory. However, mass production of this technology at meaningful scale is a whole other story. Indeed, there’s something to be said about the short-seller concerns with this name. Investors are likely taking on more risk with this stock than with others. However, the potential upside is significant.
Investors ought to remember to size such speculative positions accordingly. Additionally, investors should remember that chasing momentum in such stocks can be a dangerous endeavor. After all, the recent decline in QS stock speaks volumes about the downside risks with such high-growth plays today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
