QuantumScape (NYSE:QS) is down about 33% in 2022. And don’t even get investors started on how far QS stock is down from its December 2020 highs. That’s the nature of a company that has the potential to be disruptive.
So, if you’re looking to sell, I wouldn’t blame you, it can be easy to let emotions run amok.
However, investors may be surprised to know that, as of this writing, the stock is slightly outperforming the S&P 500 since the onset of the Russian invasion of Ukraine. This doesn’t mean that QuantumScape has become a risk-off stock. But the Biden administration has made it clear that it’s not deviating from its clean energy plans. And rising oil prices may also help provide a floor for QS stock.
That may not be music investors’ ears but it’s a start.
Back to Groundhog’s Day
Every time I write about QS stock, it feels a bit like Groundhog’s Day. On the one hand, the successful production of solid-state battery technology at scale will be a game changer for mass adoption of electric vehicles (EVs).
Important to note that solid-state technology won’t be just a game changer for electric vehicles. That was one reason I wrote that investors should be optimistic about the company’s deal with Fluence Energy (NASDAQ:FLNC) to provide solid-state battery technology to the company’s stationary energy storage applications.
With all that said, in the best case scenario, QuantumScape is going to be in pre-pilot production until 2023 at the earliest. That means it won’t be until at least 2024 that the company could deliver a product to market. Naturally, there are legitimate concerns that the company may get beaten to market by competitors who are building their own solid-state batteries.
That’s not to mention the investment the federal government is making in our nation’s charging infrastructure. While charging stations won’t be as prevalent or efficient as gas stations, at least not at first, it may be enough to tip the scales in favor of lithium-ion batteries for the initial wave of the EV revolution.
Is the Glass Half-Empty or Half-Full?
The bad news for QuantumScape investors is that the real payoff for the stock is still a couple of years away. That’s not an appealing narrative for many investors who are looking to squeeze out whatever gains they can get in this volatile market.
The good news is that for investors who can wait on QS stock, it has the potential to post a significant gain. As Luke Lango points out, solid-state batteries are “one of the most promising technological breakthroughs of the 2020s.” And, QuantumScape is at the forefront of a sector that stands to benefit the most from the adoption of solid-state technology.
Is QS Stock a Buy?
If you’re holding QuantumScape in your portfolio, you know how volatile it is. However, QS stock currently trades with a beta of around 9.5. Even for high-beta stocks, that’s significant. But the stock’s beta is coming down from double-digit levels of a few months ago.
A similar story is being told in terms of the stock’s short interest ratio. While it’s still uncomfortably high at nearly 20% (19.17%), it hasn’t been moving that much in the last six months.
One area that I would pay attention to is institutional ownership. It’s currently at 20% which is not that significant. However, over the last 12 months, buyers have essentially doubled up sellers. That trend is likely to continue provided that QuantumScape continues to hit its testing and production targets.
In my opinion, there are better options for investors who are looking for growth right now. But if you have a long-term perspective and you keep your position small, QS stock may be a stock that will reward you well by the end of the 2020s.
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.