QuantumScape (NYSE:QS) may be on the way to breakthroughs in 2024, but it’s a long climb before reaching profits and significant revenues. Investors need to tiptoe towards QS, especially those who are risk-tolerant speculators. This is a key part of this QS stock analysis.
Grey clouds are overhead because of the company’s financial situation, even with the possible rays of improvements. We’ll talk about why QuantumScape might not be an investment to take a step forward now and ever.
Battery Tech Will Not Sustain
Professors at Stanford University put together QuantumScape brick by brick back in 2010. They had a dream of making and developing solid-state batteries for electric vehicles. They wanted it to have a higher density, be safer, and have a faster charge. Despite the hurdles, they have outrun performance expectations and shipped prototypes to VW Group.
QuantumScape is almost coming to fruition with solid-state battery technology, which could yield financial gains. With EV battery costs ranging from $4,00 to $20,000, solid-state batteries offer sweeter deals than traditional lithium-ion batteries. However, mass production remains a wall to be climbed because of cost and scalability issues.
With Volkswagen’s hefty investment, QuantumScape plans for solid-state electric vehicle (EV) batteries to hit the shelves in the upcoming year. No, Toyota and hydrogen-powered batteries will face QuantumScape’s high-performance, fast-charging capabilities.
Financials Are Also Showing Weakness
On Valentine’s Day, February 14, QUantumScape dropped its curtains on its Q4 fiscal 2023 results after announcing the CEO transition. The results pulled the veil on a dip in cash reserves from $235.393 million to $142.524 million between 2022 and 2023. Operating expenses climbed from $113.434 million to $124.64 million. There was even a thorough review of the shareholder letter but it did not provide a precise timeline for full product commercialization.
In Q4 2023, QuantumScape’s net loss rocketed from $109.053 million to $113.339 million, producing a 23-cent loss per share instead of the 19-cent loss that Wall Street had expected. It’s still toe-to-toe with financial difficulties. Also, its commercialization timeframe is lost in the fog, making one thing clear, investing in it is risky. It’s also a massive part of my QS stock analysis.
Avoid QS Stock Right Now
Although QuantumScape’s shares declined more than 90% from their peak the company’s $2.2 billion enterprise valuation seems excessive when significant revenue is nowhere to be found. Forecasts say low income, raising eyebrows about its high valuation and highlighting the need for careful investment because of the high level of risk.
While having no income at the moment, QuantumScape has $350 million slip through its fingers yearly. It also has over $1 billion in cash reserves from its SPAC transaction, so there is some runway. But the question is whether many investors will stick around to see how long it will take for profitability to materialize.
In my view, manufacturers must see proof of the solid-state batteries’ viability within the year, or risk competition-related headwinds taking control of their valuations. It’s a race against the clock, and in my view, QuantumScape isn’t winning this race. This concludes my QS stock analysis.
On the date of publication, Chris MacDonald 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.
