I read the news QuantumScape (NYSE:QS) agreed to supply a second top 10 (by global revenues) automotive OEM (original equipment manufacturer) with 10 MWh of pre-pilot solid-state cell capacity. So naturally, I immediately thought of Stellantis (NYSE:STLA) and QS stock.
Here’s why I reacted this way.
Stellantis Has the Desire
Many investors didn’t seem to care that Volkswagen (OTCMKTS:VWAPY, OTCMKTS:VWAGY) invested $200 million in solid-state batteries and battery cell manufacturing.
However, it’s not surprising that QS stock gained 11.5% on the Sep. 21 news of the company’s supply deal. Even though QuantumScape described the company as a second top 10 OEM, I continue to think that the parent of Jeep could be the one.
After all, according to GlobalBrandsMagazine.com, Jeep is the 15th largest global brand, right behind Volkswagen in the 14th spot. And it’s looking to accelerate its electrification plans.
In July, Stellantis CEO Carlos Tavares confirmed its ambitions vis-a-vis electric.
“The customer is always at the heart of Stellantis and our commitment with this €30 billion-plus investment plan is to offer iconic vehicles that have the performance, capability, style, comfort and electric range that fit seamlessly into their daily lives,” Tavares stated in the company’s July 8 press release for its EV Day virtual presentation.
“The strategy we laid out today focuses the right amount of investment on the right technology to reach the market at the right time, ensuring that Stellantis powers the freedom of movement in the most efficient, affordable and sustainable way.”
By 2030, it wants 40% of its vehicle sales in the U.S. to be LEVs (low emission vehicles) and 70% in Europe. In addition, it announced that solid-state batteries would be introduced by 2026. VW plans to have 70 EV models and 25 million EVs on the road by the end of 2029.
So, it’s possible Jeep, and Stellantis could be the ones.
It’s All Good for QS Stock
In late August, QS stock dropped below $20 for the first time since November 2020. So, I don’t think there’s any question that $20 is the floor for this stock. If you’re a risk-taker, I would be buying should it fall below $20 before the end of the year.
My last commentary about Stellantis was on Aug. 31. At the time, I suggested that it was a speculative buy, having dropped below $20 for the first time in nine months. I still feel this way.
“Normally, with a developing business such as QuantumScape, I’d be incredibly cautious about recommending its stock. However, as I said, this recommendation is aimed at people using fun money to bet on the next great breakthrough in the electrification of transportation,” I wrote on the last day of August.
“Most definitely, it’s not a buy-and-hold investment for your retirement portfolio.”
Indeed it’s not.
But as the Barron’s Sep. 21 headline stated, “QuantumScape Stock Jumps Because More Car Companies Want Its Batteries.”
Is that so hard to understand? It’s not as if a million different battery producers are pounding on the car manufacturer’s doors. Either the Ford’s (NYSE:F) of the world develop their own batteries, or they go to QuantumScape, the next best thing.
OEMs buy a lot of the components that go in a car or truck from other manufacturers. Why is it so hard to imagine they do the same thing for car batteries?
This news story might all turn out to be much ado about nothing come 2026. But in the meantime, it’s a big deal. You can be sure the employees of QuantumScape were out celebrating after work on September 21.
What say the shorts?
Bottom Line
At $132, QuantumScape was a costly stock. At $23.50, the upside outweighs the downside. The risk-to-reward proposition is as good as it’s going to get.
If you can afford to lose it all, now is the time to buy.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
