- QuantumScape (QS) stock delivered a slightly larger loss than projected
- The company is still over a year away from bringing a product to market
- This range-bound stock may hold some intrigue for traders, but investors don’t need to rush in
The day after posting earnings, QuantumScape (NYSE:QS) is up slightly. Considering that this is a pre-revenue company, this may just be a case of investors looking for buying opportunities wherever they can find them. That being said, the short-term price movement of QS stock is less important than what happens in the long-term.
I view QuantumScape like reading a suspense novel. You think the ending is going to be really good, but you’re currently in the middle of the book and the plot is still being laid out. Investors that got in early on QS stock read the last chapter first.
But when you do that, it can make you impatient at a time when patience is the most important thing you need.
QuantumScape Is a Long-Term Play
I know QuantumScape won’t have a product available for at least another year, but I find the technology intriguing. I agree with Luke Lango’s take on the company. Lango recently reiterated his bullish thesis on the company’s solid-state battery that has the potential to take away many pain points for EV adoption.
Specifically, a solid-state battery will increase the battery range, it will be able to charge quickly (80% in 15 minutes), it will help bring down the cost of an EV, it will have a longer usable life and it will be a safe option.
Furthermore, QuantumScape has 200 patents and patent applications. This depth of intellectual property should carry some weight as the company will continue to need financing prior to generating revenue.
And the company is making progress. On the earnings call, QuantumScape said they have now tested battery cells stacked with 16 layers. Previously, the company tested single-, four-, and 10-layer cells. The company has to build up its battery cells layer by layer (similar to a deck of cards).
However, before the company can bring a product to market, they have to reach 24 layers. After this is done, QuantumScape will still need to build a pilot plant to prove that the cells can be manufactured at scale. That is expected to happen sometime in 2023.
QuantumScape is Hedging its Bets
With that said, I have my concerns, and it appears other investors do as well. As I wrote in February, my concern is what the state of play will look like in the EV battery market by the time QuantumScape is delivering batteries at scale. Already, several companies are developing their own solutions to confront range anxiety. And that says nothing of other companies that are attempting to develop their own solid-state battery solution.
It appears that QuantumScape also understands the realities of the electric vehicle market. The company has entered into a partnership with Fluence Energy (NASDAQ:FLNC). This will allow the company to use its solid-state battery technology in the Fluence’s stationary energy storage applications.
You Can Wait on QS Stock
QuantumScape is a pre-revenue company. So right now, there are no earnings to consider. And in the company’s most recent earnings report, it posted a loss of 21 cents per share. This was four cents below analysts’ expectations. However, it was essentially the same as in the same quarter in the prior year.
Right now, that’s not having much impact on analysts’ opinions. And that’s good news for investors. Currently, analysts give QS stock a consensus price target of $23.33 which suggests the stock could have a 52,11% upside. And in mid-April, Deutsche Bank initiated coverage on QuantumScape with a $20 price target.
QuantumScape continues to have high short interest (it’s currently above 20%). That may create an opportunity for traders who are looking to profit from a short squeeze. However, it’s not clear that QS stock has that kind of interest from retail investors.
Looking at the stock chart, QS stock has found some nice support around its current price. But the issue is in the upside. Specifically, there doesn’t appear to be much of that to excite investors, but active traders may have an opportunity even with QS stock trading in a narrow range.
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.