- Porsche deal has the potential to be a substantial business catalyst for QuantumScape (QS)
- Fluence opens up diversified revenue streams for the firm in the future
- Betting on early successes to scale until significant revenue generation years from now
Investing in QuantumScape (NYSE:QS) stock isn’t for the faint of heart or those without conviction. It will take a stomach for volatility and a long-term bullish outlook for those willing to buy in early. And make no mistake, even though QuantumScape went public in August of 2020, it is still early in the game.
If the firm is successful in commercializing solid-state batteries it won’t happen until 2024 at the earliest. And significant revenues likely won’t occur until 2026.
That means investors are going to experience volatility but the payoff for those that get in now could be exponential. With compound annual growth pegged at 36% annually through 2028 the potential is massive. Here are the reasons QuantumScape could win.
| QS | QuantumScape | $17.77 |
Porsche Deal
Porsche is moving rapidly toward an electrified future that could include QuantumScape to a great degree. The German automaker has already begun a strong push toward electrification of its model lineup.
The results have been impressive and suggest that EVs are the future for Porsche. The firm delivered over 300,000 vehicles globally in 2021. 41,296 of them were the Taycan, an all-electric sports car. EVs are certain to remain a dominant feature of the Porsche lineup.
Further, it makes sense that QuantumScape should benefit from that evolution. Porsche is owned by Volkswagen (OTCMKTS:VWAGY) which is the largest shareholder of QS stock. Volkswagen invested $100 million in QuantumScape in 2018 and another $200 million in 2020. So it should be no surprise that QuantumScape is working to integrate some level of solid-state battery technology into an electric version of Porsche’s 911.
Although the news is positive, it won’t materially affect QS stock for years. Porsche expects EVs to account for half of sales by 2025. That may or may not include solid-state powered vehicles featuring QuantumScape batteries. Good news, yes. A gamble, absolutely.
Fluence Opens Doors
Another reason to bet on QuantumScape is that it is diversifying its solid-state battery applications. Along with electric vehicles, battery energy storage systems are another key market for solid-state batteries.
QuantumScape is carving out a presence in that market as well. In January, it signed a multi-year agreement with Fluence Energy (NASDAQ:FLNC) to develop solid-state stationary storage applications.
Stationary energy storage installations are predicted to experience 2,000% growth through 2030. Solid-state battery technology will be attractive to such applications once commercialized because it is simply more efficient.
Early research suggests that there is a $385 billion opportunity in front of the companies. Carve out a significant chunk and QS stock rises multiple times. Again, this requires a long-term view and an appetite for risk.
But the positive news is that QuantumScape has proven that it is capable thus far. There is no reason to count it out as a winner in the nascent solid-state battery industry.
Wins to Continue?
The good news is that QuantumScape has already shown that it has what it takes to potentially be a revolutionary company.
Investors are going to have to rely on suggestions that the company can meet milestone after milestone and be among the first firms to commercialize a solid-state battery.
Fortunately, such evidence does exist. It was back in mid-November that the company announced that it had reached a significant milestone ahead of schedule: A 10-layer battery cell with 800 cycles that charges in less than an hour at 25 degrees celsius. It achieved that goal, its final for 2021, ahead of schedule.
Bullish investors should take that to mean that the company can replicate those 2021 successes in this year and subsequent years to the point that it commercializes a solid-state battery for multiple applications.
Takeaway
For bullish investors, there’s plenty to like about QS stock. Volatility will continue. There’s little doubt about that. But QuantumScape has important industry players on its side and early success.
That implies that potential is as high as it’s ever been despite lower-tech stock prices currently.
On the date of publication, Alex Sirois 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.
