While the analyst has significant doubts about the company’s ability to scale its solid-state lithium metal battery technology, the fact that his target price provides some upside in the months ahead is good news for long-time shareholders.
Trading well off its 52-week low hit in March, the latest analyst initiation is a vote of confidence when QuantumScape has delivered little news to encourage more buying of its stock.
The company’s first-quarter 2022 earnings are on April 26. Until then, this latest news will have to do.
I don’t think the analyst’s views about QS stock should surprise anyone who’s followed the company for a reasonable amount of time.
Here’s what The Fly reported about Rosner’s initiation: “The analyst believes QuantumScape still needs to demonstrate it can scale up its technology and solve large technical challenges ahead, and even if all goes according to plan, the company is still several years away from mass manufacturing and even further from monetizing.”
In August 2021, I suggested that QS was a speculative buy under $20 for aggressive investors. However, in the second paragraph, I alluded to the fact that it would not “have a product in production until 2024 or 2025.”
You don’t have to be an MBA to know that a three or four-year timeline would require plenty of capital and little hope for profits until two or more years after hitting commercial production. So we’re talking about five years of significant losses in the best-case scenario.
In 2021, QuantumScape operations lost $215.3 million, almost 3x higher than a year earlier. In Q1, 2021, the company’s operating loss was $44.7 million. I wouldn’t be surprised if it were triple that amount in this year’s first quarter.
The important thing to take from the initiation is that another analyst covers the company and its stock. Rosner’s initiation brings the total to eight, with seven at hold and one at a buy rating.
As more analysts join the fray, QS stock’s target price is likely to move higher, no matter their rating. So, even though investors can view Rosner’s words quite negatively, his actions suggest something else entirely.
On the date of publication, Will Ashworth 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.