It was a big news when U.S. President Joseph Biden signed the long-awaited $1 trillion infrastructure bill recently. The implications will be profound for solid-state electric-vehicle (EV) battery maker QuantumScape (NYSE:QS), as well as for anyone holding QS stock.
As part of the bill, $7.5 billion will be allocated towards the build-out of electric vehicles (EV) infrastructure. This will include increasing the availability of EV charging stations across the country.
It’s a milestone in fulfilling Biden’s pledge to build 500,000 charging stations in the U.S. — and as we’ve seen, QuantumScape achieved its own milestone not too long ago.
Despite all of this positive news, one prominent Wall Street analyst just gave QuantumScape a downgrade and a major price-target cut. Informed traders will surely want to know why he chose to do this — and may choose to adjust their investments accordingly.
A Closer Look at QS Stock
Late 2020 was a great time to be invested in QS stock, to say the least. During that time, QuantumScape’s share price went from $12 to $132.73 in less than two months.
In hindsight, it’s easy to see that this melt-up was too much, too fast — and 2021 has not been kind to folks who chased QS stock above $100. Painfully, the share price declined to $40 in April, $30 in May and $20 in August.
This doesn’t necessarily mean that QuantumScape shares aren’t destined to reach $130 again. It’s just not likely to happen this year yet. However, there does appear to be a comeback in the works.
By the middle of November, QS stock had recovered to $35 and was in a slow but steady uptrend. However, one financial expert seems to suggest taking profits on the stock, assuming you’re not underwater in your long position with QuantumScape.
QuantumScape co-founder and CEO Jagdeep Singh was quoted saying, “We are delighted to share this data on 10-layer cell performance.” He was referring to the Nov. 16 release of some highly encouraging testing data regarding QuantumScape’s highly anticipated 10-layer battery cell.
Apparently, the data showed 800 cycles at better than one-hour charge rates at 25 degrees Celsius, with energy retention greater than 80%. With that, QuantumScape achieved the objective that it had laid out for 2021.
Furthermore, the company has now attained all the milestones which QuantumScape had set out at the beginning of the year. Justifiably, the company’s CEO called these results “groundbreaking.”
Additionally, Singh boasted that “no other player has demonstrated equivalent performance with solid-state or lithium-metal battery technology.”
Price Target Gets a Haircut
The only thing left to do now, is focus on the company’s goals for 2022 and 2023 — these include further increasing the quality, consistency and layer counts for the next-generation battery cells.
With all of QuantumScape’s major objectives for 2021 having been reached, the bullish thesis should be crystal-clear. However, not everyone on Wall Street is convinced.
In fact, Morgan Stanley analyst Adam Jonas downgraded his rating on QS stock from $70, all the way down to $40. That’s pretty intense, right? Adding insult to injury, Jonas also gave QuantumScape a downgrade from “buy” to the equivalent of “hold.”
Reportedly, the analyst recommends taking profits because he sees more competition for QuantumScape — that’s a fair assessment of the situation.
However, Singh has a rejoinder. The CEO said that, “we believe no other player has demonstrated equivalent performance with solid-state or lithium-metal battery technology.”
The Bottom Line
QuantumScape’s recently released data on the company’s 10-layer battery cell should provide encouragement to the shareholders. In light of this data, Singh may be right about the superiority of his company’s solid-state battery technology.
That being said, informed investors should acknowledge that QuantumScape isn’t the only player in the game. Competition is, and will continue to be, an important factor to consider.
Therefore, a moderately bullish stance on QS stock is warranted at this time.
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.