QuantumScape (NYSE:QS) stock could be a long-term winner in the making assuming it continues to make progress bringing its line of solid-state batteries (SSBs) for electric vehicles (EVs) to market.
It’s richly priced based on its current financials, but if it can hit the projections it’s made for several years down the road today’s valuation may look more than reasonable in hindsight.
The problem is that these factors may make it a great buy-and-hold opportunity.If you’re looking for something that’s going to bounce back in a matter of months rather than years, though, look elsewhere.
Sure, some may see the opportunity to trade in and out of it. Others may point to its moderate short interest as a sign it could get short-squeezed. There may be a way for some nimble traders to scalp quick gains from these factors.
Some small pops could happen. Just don’t count on a mid-to-high double-digit percentage move higher, much less a rapid recovery to its past high watermark. Far down the road, this early-stage EV battery maker could soar once it hits a major breakthrough or milestone.
For now expect it to provide the same type of middling returns it’s delivered since cratering in value earlier this year.
A Near-Term Rebound and QS Stock
Admittedly, there are factors that could give QuantumScape shares temporary boosts today and going forward. A recent example is the company’s last quarterly earnings release late last month. As the company still is in pre-revenue stage, there wasn’t much to take away from the numbers, but that didn’t stop investors from giving QS stock a double-digit percentage pop.
Another factor that could continue giving shares short-lived boosts is the stock’s moderately high short-interest (15.1% of outstanding float). Plus, there’s progress being made with the U.S. infrastructure spending bill that has given this stock a small boost as well.
I don’t see QuantumScape getting that much of an extra benefit from this development because as with as with ChargePoint (NYSE:CHPT) and other EV-related companies that went public as a special purpose acquisition company (SPAC) route, investors already priced-in the tailwinds from a Biden administration
Many of these types of stocks went on incredible runs higher between Election day and Inauguration day.
Sure, prices since then have come down considerably. QS stock is one that saw the biggest declines, falling more than 80% off its $132.73 per share high.
Even at today’s deflated stock price many of the benefits from the U.S. government that helped to speed up the shift to EVs is likely a priced-in factor.
Putting it simply, don’t count on the infrastructure bill, its moderate short-interest, or any other more near-term factor, doing more than give this stock a short-lived boost.
Could Still Payoff in the Long Run
Quantumscape shares could continue to tread water. The off-the-charts excitement for EV stocks experienced last winter hasn’t shown any signs of coming back. The factors mentioned above aren’t going to do much to renew bullish sentiment.
Yet that doesn’t mean you can’t still win in the long-term by buying QS stock at today’s prices (around $20 per share). The company may still be years away from turning its battery technology into SSBs that can beat the batteries currently used in electric vehicles (lithium-ion batteries) in terms of price, range and safety.
If and when it’s able to do so QuantumScape will be well-positioned to commercialize its technology primarily because of its strategic partnership with Volkswagen (OTCMKTS:VWAGY).
Recently, when talking about SPACs with big upside, I talked about how, if it all works out, Quantumscape could be generating $6.5 billion in sales by 2028. With high projected margins as well, entering a position may be worthwhile.
If QuantumScape is able to bring its SSBs to market, the underlying business (valued at around $10 billion based on the stock’s current market capitalization) could end up being worth many times what it’s worth today (around $10 billion, based on the stock’s current market capitalization).
Expect Further Sideways Price Action
Putting it simply, don’t expect this stock to make a trip to its all-time high anytime soon. It’ll likely be many years, if at all, that it gets to $132.73 per share once again.
Even a near-term partial rebound may be questionable, despite factors like high short-interest and the infrastructure bills as possible catalysts to give shares a pop.
There’s still a path for QS stock to pay off in the long term. This may be fine for some investors, but if you’re looking for opportunities that will play out over shorter time horizons? It’s best to look elsewhere.
On the date of publication, Thomas Niel 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.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.