I’ve been writing about QuantumScape (NASDAQ:QS) for about a year. During that time, QS stock has been to the moon and back. But in the past few months, it seems shares have settled into a range.
That’s good news for investors who got in on QS stock shortly after it went public. But investors who entered a position in the past few months have little, if any, gains to show for it.
No matter when investors bought QS stock, though, they’re in for a long wait before the company delivers any revenue. Management has said it expects to generate positive revenue in 2024 or 2025.
I believe QuantumScape will bring a solid-state battery to market. If it does, it has a chance to be a game-changer for electric vehicles (EVs). However, it’s possible a competitor will beat QuantumScape to market and steal its thunder.
It’s this half-empty, half-full outlook that makes QS stock difficult to recommend as a “buy” and equally difficult to recommend as a “sell.”
The Holy Grail of the EV Market
Solid-state batteries are the Holy Grail of the EV industry. If successfully manufactured to scale, a solid-state battery will take away many of the pain points that exist with lithium-ion batteries. Specifically, solid-state batteries hold the promise of a longer range, longer overall battery life, faster charging and a lower cost.
But as the saying goes, if it was easy it would have been done already. Solid-state batteries present some significant engineering hurdles.
The uber-secretive QuantumScape says it is making breakthroughs. It claims to have discovered what causes lithium dendrites and developed a material to suppress their growth. But not everyone is convinced.
Innovation Loves Company
QuantumScape expects to begin commercial production of its solid-state battery in 2024. It already has at least two partnerships lined up, including one with a “large automaker,” if and when that day arrives.
In my most recent article about QuantumScape in August, I likened the company’s development of a solid-state battery to the Covid-19 vaccine race. My takeaway was that just as there is more than one vaccine, there will be more than one company that will be successful in developing a solid-state battery.
Although that doesn’t give investors a firm floor for the stock, it does reduce the risk of QS stock becoming worthless. And a look at the company’s balance sheet shows there should be sufficient cash on hand to get a solid-state battery to market.
The Bottom Line on QS Stock
Normally, I put a lot of stock in the opinion of the analyst community. However, in the case of QuantumScape, I’m reminded of the nursery rhyme about the little girl with a curl:
There was a little girl,
Who had a little curl,
Right in the middle of her forehead.
When she was good,
She was very, very good,
But when she was bad, she was horrid.
The analysts that like QS stock, love it. The ones that don’t like it, hate it.
I don’t like to see investors paying tomorrow’s price today. While the bulls may pound the table to say that QS stock is a bargain, there is a chance shares are overvalued. That’s the problem with pre-revenue companies like QuantumScape, which are destined to move up and down based on rumors and headlines.
Shareholders have to wonder how long they’ll have to wait until QS stock lives up to its potential. With competitors hot on QuantumScape’s heels, an equally important question is how big the company’s addressable market will be if it is successful.
Either way, buying QuantumScape is a question of trusting your gut instincts. As for me, I’m going to stay away from QS stock until I have more answers than questions.
On the date of publication, Chris Markoch 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.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.