QuantumScape (NYSE:QS), a startup founded a decade ago, touts a game-changing solid-state battery tech for EVs.
However, it’s unproven at scale and faces lawsuits over alleged fraud. A recent $300 million equity offering raised concerns about dilution.
Investing in QuantumScape may seem like a binary bet, hinging on whether they successfully bring a solid-state battery for EVs to market.
However, there are other factors to consider, which could make it a risky proposition at current prices.
QuantumScape posted Q2 earnings of ($0.26) per share, missing estimates by ($0.04) and down slightly from the previous year. Analysts expect a full-year negative EPS of -0.98. The CTO sold 144,623 shares at $10.14 each, holding 766,495 shares currently.
A Closer Look at QuantumScape Stock
Credit Suisse AG substantially boosted its QuantumScape holdings in Q1 2023, owning 422,216 shares valued at $3,454,000, indicating 0.10% ownership.
However, not all important investors are buying into the stock. Insider Mohit Singh recently sold 10,300 shares at $8.52 per share, totaling $87,756. Singh now holds 700,386 shares valued at approximately $5,967,288.72.
Insiders have sold 584,894 shares worth an estimated $4,858,682 over the past 90 days. Insider ownership is currently at 10.18%, but appears to be on the downtrend. This update is relevant for investors and those tracking QuantumScape’s stock performance.
Solid-state batteries could revolutionize EV batteries, providing enhanced range and safety compared to current lithium-ion batteries. If SSBs can be mass-produced for EVs, they may quickly replace lithium-ion batteries.
However, short-sellers and others who have proven to be skeptical about the science behind these batteries have pointed to various issues tied to the eventual commercialization of these batteries that is concerning.
It’s one thing to produce an effect in a lab setting, and it’s another to test this effect int he real world.
Investors once pushed QS stock above $100 per share during the EV hype, and some still invest despite its low price.
A potential QuantumScape breakthrough may not significantly boost its current $7 per share value. Various macro factors may continue to pressure the stock, and market reaction to a breakthrough could be less positive than expected.
The Bearish View
Evercore ISI’s bullish case for QS stock has two flaws. First, commercialization isn’t imminent. While QuantumScape has advantages, there’s no clear timetable for robust revenue and profits from its EV battery technology.
Commercialization might take a decade or never occur. In the near term, this uncertainty could cause the stock to keep declining.
Cost advantages may not be as significant as they seem. Other factors further diminish QS’s attractiveness. Time will reveal if they have a technological edge, but competitors may reach the market sooner.
What Now
Investors in QS stock aren’t expecting quick gains; they know the QuantumScape story will unfold slowly. However, some believe the commercialization stage might not arrive until the mid-to-late 2020s.
QS stock could face impatience due to its long timeline, and shareholder dilution is a concern as the company may need more funding for SSB technology development.
I think this is a company investors can watch for a few years and probably pick up at a lower price. For that reason, I remain on the sidelines with this name right now.
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.