Equity markets are bouncing back today, finally reflecting some bullish sentiment from investors who have begun to rotate out of growth stocks and into more value-centric parts of the market. Unfortunately for QuantumScape (NYSE:QS), and other more speculative assets, that hasn’t translated into positive price action today. In fact, QS stock is down about 8% in early afternoon trading as investors price in some rather bearish news on the company.
QuantumScape just reported earnings for its fiscal second quarter of 2024, and the numbers weren’t great. QuantumScape brought in a new loss per share of 25 cents, which was below analyst estimates of -22 cents in EPS for the quarter.
Additionally, an analyst from TD Cowen also cut its price target on QS stock today, citing high cash burn and concerns around the company’s path to profitability as reasons for the downgrade.
Let’s dive into what to make of this news and where investors may want to go with QuantumScape.
QS Stock Sinks After Reporting Earnings, Downgrade
As an early-stage solid-state battery maker, plenty of enthusiasm has been priced into QS stock in the past. QuantumScape’s purported technology is certainly interesting, and there does seem to be something there.
However, the company’s path to profitability has ultimately been a problem for investors in the company for some time. Solid-state battery technology is something that’s worked in theory and in small laboratory settings. However, expanding production to scale is something that’s been elusive for many of the top names in this space.
Thus, while QuantumScape clearly has a smart team behind the scenes working to find a way to create a sustainable business model, many in the market believe the company may simply run out of cash before it can make an impact. That’s a real concern that continues to be priced into this stock, which is down dramatically from its peak.
Until there’s a pathway to commercialization and profit, this stock appears likely to continue on this trajectory — at least, that’s my view right now.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
