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Wed, April 5 at 4:00PM ET

Why Is QuantumScape (QS) Stock Heating Up Today?

  • Renewed hope over strong EV demand is helping to drive QuantumScape (QS) stock higher, it’s up almost 40% in the last few days.
  • However, QuantumScape doesn’t generate any revenue at the moment, which creates a risk in this environment.
  • So even though some EV stocks are trading better over the past few days, QS stock could have limited upside in the intermediate term.
QS stock - Why Is QuantumScape (QS) Stock Heating Up Today?

Source: QuantumScape

It’s been a solid day in the stock market on Wednesday, but an even better session for QuantumScape (NASDAQ:QS). At the session high, QS stock was up 9.75%, but shares are still up more than 6% at the moment.

Today’s gain is just the latest in a string of bullish price action. The stock is up almost 40% from last week’s low and is working on its fourth straight daily gain.

So what’s got QS stock rallying so aggressively?

For those that don’t know, QuantumScape is a battery company. The company says it’s “on a mission to transform energy storage with solid-state lithium-metal battery technology. The company’s next-generation batteries are designed to enable longer range, faster charging and enhanced safety in electric vehicles.”

So with that, it’s not surprising that it’s been enjoying a solid rally on hopes for stronger demand in the EV space. More demand for EVs equates to more demand for batteries. Pretty simple, right?

Helping drive that realization is Tesla (NASDAQ:TSLA). That’s as shares are up 2.5% on the day on reports of the automaker looking to expand production at its Austin Gigafactory.

While there are circling concerns about demand for Tesla (and an oncoming recession), keep in mind that the company just churned out record fourth-quarter delivery results. While it did miss analysts’ expectations, it highlights that the EV space is still seeing steady demand.

Strong delivery results from Nio (NYSE:NIO), Li Auto (NASDAQ:LI) and others also emphasize that reality. While a recession would be a negative catalyst, it’s clear that EV demand was strong in 2022.

Will EV Demand Save QS Stock in 2023?

The Gigafactory expansion for Tesla is helping drive its share price higher on the day, but it’s been trading well over the last few days. Shares are currently up about 20% from last week’s low, which came last Friday.

That said, “trading pretty well” over a few days does not mean the stock has done well over the past few months. The same can be said about QS stock too.

Tesla shares are still down for the month of January and have already declined for five straight months. Amid that stretch, shares were down more than 67% from an all-time high and currently sit about 65% down from a year ago.

For QS stock, it’s been a similar situation. Shares fell 62% from the August high, but are down more than 95% from the all-time high. It’s been a destructive and painful run for the stock.

So to answer the question above — will EV demand save QS stock? — QuantumScape needs solid demand for batteries if it wants to stay in business. The company currently sports a $3 billion market capitalization, but there’s one problem: It has no revenue.

While its balance sheet is in okay shape at the moment, QuantumScape needs to survive a potential recession. If it can do that and debut a strong product, investors’ bets on QS stock could pay off.

However, make no doubt about it: QuantumScape is speculative in this environment.

On the date of publication, Bret Kenwell 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.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

Article printed from InvestorPlace Media, https://investorplace.com/2023/01/why-is-quantumscape-qs-stock-heating-up-today/.

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