Investors in the emerging solid-state lithium-metal battery designer QuantumScape (NYSE:QS) stock were massively disappointed in 2021.
QS stock has been plummeting since it hit a 52-week high of $71.97 on Feb. 10, 2021.
As the choppiness extended into early this year, shares dipped as low as $13.43 on Jan. 28.
They currently hover around $17.50, down almost 60% in the last 12 months. By comparison, the S&P 500 the Nasdaq 100 declined around 6.7% and 11.2% in January.
Energy-dense solid-state batteries can improve the driving range of electric vehicles (EVs). They also can shorten charging times and lower costs compared to conventional lithium-ion batteries and provide a more environmentally-friendly option.
The global solid-state car battery market size could grow “from 27,070 units in 2025 to 661,724 units by 2030, at a CAGR of 89.5%,” according to recent research.
Given solid prospects, long-term investors could find that QuantumSpace is now offering a good entry point.
However, shares are likely to stay volatile in the short run. Let’s now dive in and see why.
How Recent Quarterly Results Came
QuantumScape released Q3 financial metrics in late October. Management reported an unexpected accounting-related profit. The company ended the quarter with more than $1.5 billion in cash and expects to close 2021 with a liquidity of $1.3 billion.
Management has been working on delivering commercially-relevant prototype samples to automotive original equipment manufacturers (OEMs).
“Along with our existing partnership with Volkswagen, we now have two of the top-10 global automotive OEMs as prospective customers, and both deals have come after testing of our cells by the automakers in their own labs,” the company said in its shareholder letter.
Third-party laboratory test results released in late October indicated that the 10-layer cell retained over 80% capacity after testing at 800 cycles.
However, the company still needs to put resources into research and development as EVs utilize batteries that consist of several dozen layers.
The pre-revenue start-up is expected to announce Q4 earnings on Feb. 16. Investors would be delighted with any potential news that commercial production could start in 2024 or 2025.
Adding QS Stock to Portfolios
Among the five analysts polled, QS stock has a “hold” rating. The consensus of these analysts for a 12-month median price target stands around $36, implying an upside potential of about 130% from current levels.
The 12-month price estimates range between $20 and $40.
Therefore, risk-tolerant long-term investors who do not worry about daily volatility might consider investing in QS stock at around these levels.
Others might also consider buying an exchange-traded fund (ETF) that also provides exposure to QS stock.
Examples include the Global X Lithium & Battery Tech ETF (NYSEARCA:LIT), the Invesco WilderHill Clean Energy ETF (NYSEARCA:PBW), the iShares Russell Mid-Cap Growth ETF (NYSEARCA:IWP) and the Vanguard Total Stock Market ETF (NYSEARCA:VTI).
The Bottom Line on QuantumScape Stock
A number of companies have been working on solid-state batteries, but without any commercial success so far.
QuantumScape has also secured extensions to its existing pre-pilot manufacturing facility in San Jose.
In January the management entered a multiyear agreement with Fluence Energy (NASDAQ:FLCN) to incorporate QuantumScape’s solid-state battery technology into Fluence’s stationary energy-storage products.
Despite the exciting potential in the EV industry and efforts to penetrate into new markets, QuantumScape remains a speculative play.
Even if the company manages to scale up, it will still need several years to achieve revenues. Thus, potential investors in QS stock should be ready for short-term volatility.
On the date of publication, Tezcan Gecgil 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.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.