Electric vehicles are the future, and they’re coming in fast. The plug-in hybrid vehicle has been around for a few years now. But it’s only beginning to take off because of its environmental friendliness — especially when you compare them with gas-guzzling cars or trucks on our streets today. Currently, EVs are difficult to manufacture. But that could change thanks to QuantumScape (NYSE:QS); EVs could soon be more efficient and affordable than ever before. Hence, QS stock has a one-year return bump of around 70%.
It’s important to remember how we got here. QuantumScape, which is backed by Volkswagen (OTCMKTS:VWAGY), completed a reverse merger with Kensington Capital Acquisition Corp., and the markets reacted very favorably to the combination. At its peak in late December last year, the stock was changing hands for $132 a pop. However, it soon plunged after reopening plays started to do well.
There are several reasons why the stock has done very well recently. It reported a stellar third-quarter earnings report, an independent lab published their findings to back up their product line’s single solid-state layer cells. And the company’s CEO also provided an update on the production schedule in a letter to shareholders.
But the company is not making money yet and still manages to find itself with a market cap of $14.63 billion. If you are thinking about investing in this space, it is best to wait for this one to dip before snapping up more shares or initiating a position.
Third-Party Test Results
QuantumScape announced the release of independent third-party test results and they’re quite promising.
Mobile Power Solutions found the batteries steady with over 800 cycles at 25 °C with one-hour charge/discharge rates. Even under 3.4 atmospheres of pressure, these batteries managed to keep running strong.
Less technically speaking, these batteries are said to last longer than standard ones. And they provide better performance and affordability while maintaining almost no downtime for maintenance needs.
It is exactly the kind of news investors are craving. But they won’t hear about revenues just yet.
Instead, QuantumScape’s quarterly reports are a way to review progress made developing solid-state batteries. The company doesn’t have any sales yet. So, these releases serve as an opportunity for executives to help investors understand more about their projects’ development.
The Long-Term Impact
The company has been working hard to keep its progress a secret, but the battery test validated it. QuantumScape reported in its December 2020 Battery Showcase that they were doing well, and this news was seen positively by investors who have not yet seen any prototypes from them or received updates on when one might come out.
There is also a very exciting piece of news that came out of the company recently.
QuantumScape announced that it had signed an agreement with another top global automaker, marking the company’s second big partner. Now, QuantumScape didn’t disclose which automotive manufacturer would be partnering up for this project. But they did say it is one of the largest car OEMs in the world.
In addition, the unnamed company reportedly undertook a recent evaluation of early battery cells made by QuantumScape. Which led them to buy around ten megawatt-hours (MWh) of batteries from the pre-production “QS-0” product line. Delivery is slated for 2023 when manufacturing begins on the pre-pilot models.
The Risks and Rewards of Investing in QS Stock
QuantumScape will start production of test cells for EVs in 2023 with mass production starting in 2024 at the soonest. This means that there will only be meaningful revenues after this timeline, if they can meet their goals.
That’s pretty ambitious. Especially given how long it takes for new technology like this to catch on among car manufacturers who are often slow-moving when adapting to changes.
QuantumScape’s main aim is to create single-layer and four-layer batteries but they are even already looking forwards towards the future with ten-layer batteries in the works. These batteries are intended, and essential, for electric vehicles. Their integration with automotive majors is an important factor that could lead them to further success down the road. It would mean a larger market scale at a lower cost than their competitors.
All of this means QS stock has the potential to be a multi-bagger. Investing in startup companies is a very risky business. But with the right approach and knowledge, you can make it work for your portfolio.
The only issue with QS stock is the valuation. Once it falls closer to its 52-week low, then you will have an excellent opportunity at a great stock.
On the publication date, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.