Is This Forgotten Battery Stock Primed To Deliver Gains In The Next Leg of The EV Revolution?
Key Points
QuantumScape’s stock has plunged 95% from its all-time high.
But its stock could rise as it finally commercializes its first battery designs.
QuantumScape (NASDAQ: QS), a developer of solid-state batteries, went public through a merger with a special-purpose acquisition company (SPAC) on Nov. 27, 2020. Its stock started trading at $24.80 and skyrocketed to an all-time high of $131.67 on Dec. 22, 2020.
Unfortunately, QuantumScape missed its goal of commercializing its first batteries by 2024, didn't generate any meaningful revenue, and racked up steep losses. That's why its stock now trades at about $7. But could it eventually bounce back as the EV market expands and evolves?
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What's QuantumScape's long-term plan?
QuantumScape's solid-state batteries run on solid electrolytes rather than the liquid electrolytes used in lithium-ion batteries. That difference gives them greater stability, better thermal resistance, higher charging capacities, and shorter charging times.
QuantumScape has been co-developing its batteries with Volkswagen (OTC:VWAP.Y) over the past decade. Its latest QSE-5 battery has a cell-level density of 844 Wh/L (watt hours per liter) and can be rapidly charged from 10% to 80% in under 15 minutes.
By comparison, Tesla's (NASDAQ: TSLA) in-house lithium-ion batteries have a cell-level density of about 650 Wh/L and require 30-45 minutes for a full charge. In theory, QuantumScape's solid-state batteries could represent a major leap forward for the EV market. In reality, solid-state batteries are pricier and more difficult to manufacture than lithium-ion batteries.
That's why QuantumScape abandoned its original plan of manufacturing its own batteries in 2024 and agreed to license its technology to Volkswagen's PowerCo subsidiary and other automakers instead. Those higher-margin licensing fees and royalties could eventually help it break even, but it doesn't expect to commercialize its first designs (in low volumes) until 2027.
For now, QuantumScape is manufacturing higher-volume, near-production "B-sample" cells at its Eagle Line using its new Cobra separator process. If these samples are well-received, they could support the expansion of its commercial licensing business. It won't generate any revenue until that happens, but it expects its current cash runway to last through 2029.
Is it the right time to buy QuantumScape?
If QuantumScape successfully launches its first commercial designs, analysts expect its revenue to rise from zero in 2026 to $99 million in 2028. Its stock might seem expensive at 47 times its 2028 sales, but the solid-state battery market could expand at a 47.6% CAGR from 2026 to 2034, according to Fortune Business Insights. If QuantumScape maintains its early mover's advantage in that nascent market, its sales and profits could skyrocket. Therefore, this speculative stock might be worth nibbling on today before it attracts a lot more attention.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.