Is a Geopolitical Flashpoint Enough to Charge QuantumScape?

  • On paper, QuantumScape (QS) stock has become extraordinarily relevant due to the geopolitical crisis sparking an energy paradigm shift
  • However, Wall Street is demonstrating the power of this supposed relevance in strange ways
  • QS stock is intriguing undoubtedly but it remains a speculative wager
A sign for QuantumScape (QS).
Source: Michael Vi / Shutterstock.com

If you’re a stakeholder of QuantumScape (NYSE:QS), you really couldn’t ask for a better catalyst for the underlying investment, what with the collision of climate change and political pressure boding well for the electric vehicle industry. Irrespective of whatever else is going on, QS stock should be able to drive higher based on these two factors alone.

Just to bring everyone up to speed, no, QuantumScape isn’t an EV maker. What the company does, however, is specializing in the research and development of solid-state batteries. Presently, EVs — though becoming wildly popular among the broader consumer base — are still prohibitively expensive for most households. But SSBs could change the paradigm with high performance, high range and cheaper power units.

That would be a dramatic upside catalyst for EV integration. Naturally, this scenario is also incredibly enticing for QS stock.

Then, you have Russia’s unsettling decision to invade Ukraine and the power dynamics of hydrocarbon hegemony has shifted favor even more so toward EV integration. As myriad academic sources explained, our western allies in Europe are heavily dependent on Russia-sourced fossil fuels. A pivot to alternative transportation — while not the end-all, be-all — would provide a welcome transition.

So, why is QS stock generally underperforming? Here’s where our hearts and minds don’t necessarily correspond with reality.

QS QuantumScape $17.26

Wall Street Shows No Love for QS Stock

You don’t need access to newspapers — the digital kind but the analog variety will work just as well — to understand how present global dynamics help the case for QS stock. Instead, you merely need to pull up to your local gasoline station.

At time of writing, the national average gas price is $4.10 a gallon. Again, that’s an average, meaning that folks in California are paying $5.70 a gallon. Arizona is looking at $4.57 a gallon, which Golden State residents would find cheap under the circumstances. That’s how macabre things have gotten.

Therefore, anything related to the integration and rollout of EVs should be on fire in the market, just like oil stocks are making a killing. We’re talking the entire supply chain, from EV manufacturers to infrastructure networks to innovation-focused entities like QuantumScape. Anything that will help consumers get their hind ends away from combustion cars and into EVs should be a positive.

But that’s not what we’re seeing. For instance, QS stock is down 42% during the trailing year. Volkswagen (OTCMKTS:VWAGY), which is pivoting to electric, is down 32% over the same frame. As well, ChargePoint (NYSE:CHPT) has declined by 19%.

Let’s be fair. QS stock has jumped over 27% since the eve of Russia’s “special military operation.” Nevertheless, on a year-to-date basis, QS is down — yes, down — 23%.

You Need to Focus on Realities

Honestly, whether you are interested in QS stock or not, it should be concerning that a big oil firm like Exxon Mobil (NYSE:XOM) is up 38% YTD. It benefitted from inflation, the return to the office and the war in Ukraine. And it’s keeping these gains, at least as of this writing.

Unfortunately, this circumstance suggests that everyone — bull, bear and indifferent — needs to focus on realities. While QS stock is incredibly compelling on an aspirational, long-term basis, we don’t know if the narrative will actually pan out.

True, the Yale School of the Environment points out that European leaders have basically fast-tracked their renewable energy strategies. But the immediate, grand-scale discussion is really not centered on solar panels and wind turbines. Rather, it’s zeroing in on other sources of hydrocarbons.

Since the new normal, I’ve been hearing that sometimes incoherent masses of the internet scream about wanting facts. Well, those are the facts. As much as we all love clean, renewable energy and saving the dolphins and whatever, the fact is that we are incredibly dependent on fossil fuels.

And that’s probably why QS stock isn’t performing up to par. For most investors, it might be too aspirational to be worth the risk.

Time for Energy Realism

Don’t treat this story as a takedown on QS stock. In my heart of hearts, I hope QuantumScape finds the magic formula for the SSB. It would be game changing for the EV industry.

However, the issue is that Wall Street doesn’t find this proposition to be likely. Since market actors act rationally (most of the time), if the proposition was much more sensible, you’d see more demand for QS stock.

So, the conclusion is as follows. If you’re a risk taker, you might view QuantumScape as an opportunity that the masses have yet to appreciate. In that case, QS stock is a steal. But if you’re risk averse, you might want to think carefully about it.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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