If you’re looking to own a stake in a premier solid-state electric-vehicle (EV) battery maker, QuantumScape (NYSE:QS) is an obvious choice, or at least it ought to be. Recently, though the price performance of QS stock hasn’t been stellar.
I’ll admit, my timing wasn’t perfect when I recommended investing in QuantumScape in July. Since that time, the share price has drifted down slightly.
If you’re in it for the long haul, however, then short-term price fluctuations shouldn’t bother you too much.
QS stockholders need to be patient and have a firm belief in QuantumScape’s future-forward battery technology.
As we’ll see, the company is in an excellent capital position to develop that technology. Besides, QuantumScape’s shareholder letter revealed that the company’s batteries – and its business model – have many layers to consider.
A Closer Look at QS Stock
Late last year, QuantumScape’s share price went from $12 to $132.73 in less than two months. That situation wasn’t sustainable, so QS stock was destined to decline in 2021.
And indeed, that’s exactly what happened. Painfully, the stock tumbled to $45 in January, $35 in April, and $25 in July.
By early September, QS stock was barely holding above $20. At the same time, QuantumScape had trailing 12-month earnings per share of -$5.36.
So, momentum-focused traders won’t necessarily be enamored with QuantumScape right now.
On the other hand, at least prospective investors will now be able to get in at a greatly reduced price point. Moreover, we’ve seen the stock break above $100 in the past, and it could get there again.
Seeing Both Sides
Before any skeptic chooses to dismiss QuantumScape, I recommend carefully reading the company’s latest investor presentation.
What you’ll learn is that the company isn’t just a flash in the plan. QuantumScape has been around since 2010, and it has committed roughly $2 billion of capital investment.
Furthermore, QuantumScape has over 400 employees and more than 200 patents and patent applications.
And in terms of solid-state battery technology, QuantumScape is leading the field. Impressively, the company’s batteries enable a fast charge (0% to 80%) in less than 15 minutes.
Despite those statistics, I can see both sides of the argument. There are reasons to be concerned about QuantumScape’s viability as a business venture.
In particular, the skeptics will likely point to QuantumScape’s first-quarter performance. During that time, the company reported a net loss of 20 cents per share.
Also, QuantumScape reported zero revenue during 2021’s first quarter. In addition, a report from Scorpion Capital claimed that “the company is no different than other recently exposed SPAC promotions and EV frauds.”
On the Bright Side
Now, “fraud” is a harsh word. Still, it’s understandable if some traders are hesitant to take a position in QS stock.
Yet, it’s not all bad news for QuantumScape and the company’s stakeholders.
For one thing, a shareholder letter revealed that QuantumScape ended 2021’s second quarter with over $1.5 billion in liquidity.That’s an excellent capital position to be in. In addition, QuantumScape expects to start 2022 with more than $1.3 billion in liquidity.
This level of liquidity will enable QuantumScape to continue advancing its battery technology. Speaking of battery tech, that same shareholder letter dropped a bombshell for the industry.
QuantumScape has made and is currently testing, the company’s first 10-layer cells.
The company has already delivered results with single- and four-layer cells. Already, QuantumScape is finding “similar early capacity retention and cycling behavior” with its in-progress 10-layer cells.
The Bottom Line
Hopefully, you now have both the good and the bad aspects of QuantumScape’s prospects as a business.
It won’t always be easy to hold your position with QuantumScape. There could be more downside ahead in QS stock.
Nevertheless, a long-term position could offer outstanding returns.
You just need to have faith and lots of patience. The future of battery technology rests in the hands of a few innovative companies – and perhaps, QuantumScape is one of them.
On the date of publication, David Moadel 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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.