One great way to get exposure to the solid-state electric-vehicle (EV) battery market is through a long position in QuantumScape (NYSE:QS). However, investing in its shares will require patience as QS stock can’t seem to get off the ground lately.
Staying the course with QuantumScape requires a very forward-looking vision. Essentially, those who buy the shares are wagering on what QuantumScape calls the automotive industry’s “biggest transformation in 100 years” i.e., the conversion of internal combustion engines to electrified powertrains.
Maybe it is the industry’s “biggest transformation,” but EV battery companies aren’t necessarily making money hand-over-fist yet. Without a doubt, the owners of QS stock will want to see more progress on the financial front or at least some signs of adoption from the automotive industry.
This type of progress is sometimes difficult to measure or perceive. Fortunately, a recent announcement from QuantumScape suggests that the market may be ready to adapt and even embrace its batteries.
A Closer Look at QS Stock
Wouldn’t it be nice if we could see a repeat of the performance of QS stock in late 2020? During that time, QuantumScape’s share price went from $12 to $132.73 in less than two months.
Chasing the stock above $100 didn’t turn out to be a great strategy. In 2021, QuantumScape’s share price tumbled to $45 in January, $35 in April, and $25 in July.
Fast-forward to mid-October, and the buyers of QS stock are still struggling to keep it above $25. Still, that doesn’t mean that it’s time to give up hope for a recovery of the shares.
QuantumScape is expected to issue its next earnings report today after the market closes. The results could boost the shares nicely. As of the end of the second quarter, QuantumScape’s trailing 12-months earnings per share was -$5.36.
Hopefully, positive news from the company later today will encourage the owners of QS stock. Investors should expect the shares to eventually reach $100 . After all, QuantumScape’s stock price previously exceeded $130.
A Mystery Partner
When a company issues an SEC form called an 8-K, typically it denotes a major event that could have an impact on its shareholders.
QuantumScape’s recently published 8-K form definitely falls into that category, as it has implications for both the company and the solid-state EV battery industry generally. The news disclosed within the 8-K signals greater adoption of QuantumScape’s technology on the part of what I call Big Auto, or America’s largest automakers.
So I won’t keep you in suspense any longer. According to the SEC form, QuantumScape recently “signed an agreement with a second top ten (by global revenues) automotive original equipment manufacturer” (OEM).
The 8-K form doesn’t explicitly disclose the name of the first OEM. However, presumably it’s Volkswagen (OTCMKTS:VWAGY), which invested $100 million in QuantumScape back in 2018. The second OEM apparently committed to collaborate with QuantumScape to evaluate prototypes of its solid-state battery cells.
Moreover, the mysterious, unnamed company plans to “purchase 10 MWh of capacity from [QuantumScape’s] pre-pilot production line facility [also known as QS-0] for inclusion in pre-series vehicles, subject to satisfactory validation of intermediate milestones.”
Waiting for Production
Sometimes less is more. By that, I mean that less information can create more excitement and anticipation. Just maybe, QuantumScape can generate more buzz and spark investors’ interest to a greater extent by omitting the name of the second OEM.
Not that the company’s investors want to be kept in the dark. Some information is provided, thankfully, as at least QuantumScape has revealed when it expects to deliver the prototypes and launch production:
“The OEM has already evaluated early cells, and the intermediate milestones consist of more advanced prototypes of the Company’s cells, expected to be delivered before QS-0 starts production in 2023.”
That’s a long wait, but it should be worth the time and effort. In the meantime, keep your eyes peeled for more possible clues about the identify of this large, unidentified OEM.
The Bottom Line
Getting a commitment from Volkswagen was a huge deal for QuantumScape’ in 2018. Could the arrangement alluded to in QuantumScape’s recent 8-K form be an even bigger deal?
It’s a definite possibility. And the folks who have held QS stock through thick and thin could certainly benefit from some positive news. This might just be the catalyst they’ve been waiting for.
For now, though, QuantumScape’s loyal shareholders can only watch and wait; that’s easy to say, but it’s often hard to do.
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.
