American battery manufacturer QuantumScape (NYSE:QS) is all over the place today. QS stock is down almost 10% this morning after Morgan Stanley downgraded the company to “equal weight” from its previous “overweight” rating. This comes after QuantumScape reported achieving all of their 2021 goals ahead of schedule, citing promising technology development.
So, what else is going on with QuantumScape today? Let’s take a closer look.
QuantumScape released important testing data this morning, demonstrating major developments related to 10-layer solid-state batteries. Chief Executive Officer Jagdeep Singh revealed the degree to which their findings were promising, as well as the accelerated timeline within which the company achieved them.
“We are delighted to share this data on 10-layer cell performance. This demonstrates that we continue to successfully execute on the objectives we established to scale up our technology and manufacturing efforts. These are groundbreaking results, as we believe no other player has demonstrated equivalent performance with solid-state or lithium-metal battery technology.”
In spite of the alleged competitive advantage of the technological breakthrough, some analysts aren’t so optimistic.
Why Are Analysts Downgrading QuantumScape? And What Does It Mean for QS Stock?
There has been growing anticipation for results from the battery manufacturer. However, even after quelling investors’ growth quota, QS stock still appears bearish to some.
In a note to clients Monday night, analyst Adam Jones from Morgan Stanley downgraded QuantumScape to neutral from buy. Jones argues there is strong evidence to suggest that the recent solid-state surge could be outdone by other players in the industry by the time QS achieves commercial scale.
In fact, Jones predicts that battery commoditization through the coming years is a strong possibility, adding deflationary pressure to the industry. This is likely the catalyst behind the drop in his price target from $70 to $40.
With that said, there remains some bulls behind the bear, as they believe the electric vehicle boom only benefits the battery maker. This isn’t baseless. QS saw a surge in interest following EV maker Rivian’s (NASDAQ:RIVN) initial public offering (IPO), as the stocks have been tracking fairly closely since then.
Time will tell if QS can overcome it’s competitive woes or if Morgan Stanley’s bleaker outlook will dominate the narrative.
On the date of publication, Shrey Dua 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.