QuantumScape Stock Remains as Compelling as Ever, Meaning a 50/50 Chance

There are many reasons to believe the share price of QuantumScape (NYSE:QS) stock should rise. After all, the company is developing solid-state lithium EV batteries for future commercialization. Yet, QS stock is down almost 73% year-to-date. What’s with the disconnect?

Such batteries promise a quantum leap over current dominant lithium-ion battery technology. The chief difference between the two is that lithium-ion batteries rely on a liquid electrolyte. Solid-state lithium EV batteries on the other hand, rely on a solid electrolyte.

Solid-state batteries simply have many characteristics which make them superior. These include higher energy density, lighter weight, greater range and shorter charging times.

Sounds great, but they aren’t the panacea the EV industry needs. Well, to be more precise they aren’t commercially available. If QuantumScape reaches commercialization first, QS shares should multiply in value many fold. But that’s simply something no one can yet predict.

This is evident in multiple metrics used to understand QS stock at present.

Up and Down

QuantumScape was one of the biggest electric-vehicle stories of last year and this year. With the stock coming out of a special-purpose acquisition company (SPAC) merger with Kensington Capital Acquisition Corp., it went from under $20 per share in November to reach $130 just before 2021 arrived. Many investors believed that a true revolution in EV battery technology had arrived.

But as quickly as it rose, it again fell. Those pesky laws of gravity brought it to $40 just as quickly as it exploded upward weeks prior. The markets were overhyped, with the company’s leader being blamed by some for his grandiosity.

Share prices recovered a few times, but QS stock fell and stayed below $30 in May.

The truth is QuantumScape has a long road before it finds success. As more and more potential investors come to that realization, QS stock will continue to trade sideways.

Sideways Stagnation

One of the most obvious reasons QuantumScape will likely continue to trade sideways for the foreseeable future relates to revenues: That is, there are any anticipated until 2024.

That makes it incredibly difficult for any reasonable investor to charge ahead and plow their capital into QS stock. The idea that QuantumScape likely won’t have revenues for years to come also highlights a slight contradiction.

The contradiction is this: Four of the six analysts covering QuantumScape consider it a hold but their consensus price is $36.33. It would seem that more would rate it a “buy” given its current $24 share price. But what would justify that given again that it doesn’t anticipate revenues until 2024?

The truth is that the company is in no immediate danger. There isn’t much to worry about, but neither is there much which makes QS stock compelling currently either.

The company’s most recent financial report shows as much.

Slow Burn, Slow Return

QuantumScape anticipates entering 2022 with $1.3 billion in liquidity. It ended Q2 with $1.5 billion of liquid assets. At that rate it faces no immediate problems and should be fine for a long time to come.

But again the issue is that revenues aren’t expected to come for a long time. As that report noted: “Our longer-term targets remain unchanged — we aim to deliver prototype samples in commercially relevant form factors to automotive OEMs from our engineering lines in 2022, provide cells for R&D test cars from QS-0 in 2023 and enter commercial production in 2024-2025.”

If QuantumScape were the only viable solution to the solid-state EV battery market it would be a must buy . But there are of course multiple competitors.

Expect Tesla (NASDAQ:TSLA) to make some sort of noise at some point. It already posted updates earlier this summer. More are certain to come.

Toyota (NYSE:TM) is working to develop similar technology, and so are a roster of other vehicle manufacturers through various investments.

QuantumScape just happens to be one of many. It’ll trade sideways until it shows progress which sets it apart otherwise. That’s why there’s little reason to invest right now.

On the date of publication, Alex Sirois 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.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.