QuantumScape (NYSE:QS) is one of the more speculative stocks related to electric vehicles (EVs), but it’s seeing a big boost today. Focused on bringing solid-state batteries to market, the company has been hit hard this year. That said, despite being down almost 50% year-to-date (YTD) QS stock is up 6% today on little news.
While there’s little news today to drive this stock, there are some big catalysts investors appear to continue to be pricing in. This week, President Joe Biden announced the first round of funding for an EV charging network in the United States. This funding round will ultimately bring 500,000 charging stations across the country. For EV customers, investors and interested parties, that’s great news.
Within Biden’s Inflation Reduction Act, there are also more sources of funding for other EV-related businesses. Whether it’s hydrogen stocks or battery producers, federal money will be flowing into the space. For QuantumScape — a company that’s burning cash faster than it can replenish (due to essentially zero revenue) — these funds will go a long way.
Let’s dive into what investors should make of today’s move in QS stock.
Is Now the Time to Buy QS Stock Ahead of Federal Funding Initiatives?
For QuantumScape, it’s clear any sort of direct government funding will be welcome. The company has been struggling financially and even previously announced its intention to raise as much as $1 billion in capital. Any sort of debt or equity issuance is something the market doesn’t like, given QuantumScape’s cash burn rate. Accordingly, the market has been beating up QS stock as investors look to other money-making enterprises.
Of course, government funding isn’t likely to be a sustainable lifeline. QuantumScape will need to bring its theoretical solid-state battery to market — the faster, the better. Despite short seller concerns that the science isn’t really there yet, however, QuantumScape has seemingly made solid progress. Right now, the question the market is asking is whether that progress is enough.
Personally, I think QS stock is simply far too speculative to consider in this market. There are plenty of ways to lose money with businesses producing massive profits. Investors looking at unprofitable businesses with models that may or may not work at scale are probably better-suited looking elsewhere.
On the date of publication, Chris MacDonald did not hold (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.
