Identifying winning stocks in hindsight is a simple task. What's several times more difficult, though, is finding potential winners before they take off. Companies working on emerging technologies often face significant risks. At the same time, if successful, their stocks could generate windfall returns. Here are three such companies that are working on the technologies and infrastructure of the future.
The number of electric vehicles in use worldwide is increasing with each passing day. The shift from internal combustion engine vehicles to EVs is unstoppable. QuantumScape (QS -0.85%) may play a critical role in this transition. The company believes that the solid-state batteries it is developing can provide greater range and quicker recharge times than the lithium-ion batteries currently in use. What's more, its batteries should, in theory, also cost less than lithium-ion batteries.
If QuantumScape can deliver what it is promising, it would have a huge market for its batteries. The company estimates $450 billion of potential annual battery sales if all 90+ million vehicles produced annually shift to batteries.
There are, however, several risks to consider. QuantumScape is still developing the technology and is several years away from commercial production. Its batteries have so far only been sample tested in labs. In its second-quarter results, the company announced that it is testing 10-layer cells and progressing according to its plans. Notably, batteries for use in EVs need several dozen of such layers, something the company expects to accomplish in 2022. At the same time, QuantumScape is slightly ahead of schedule for its pre-pilot manufacturing line. Overall, the company said it is progressing on time.
QuantumScape doesn't expect to generate positive EBITDA before 2027. That's a long time from now, and many things can go wrong in the meantime. But this stock must be on your watch list, even if you decide not to buy it right now.
Another stock to potentially benefit from the growth in EVs is electric charging company ChargePoint (CHPT 0.17%). With more than 112,000 charging points in North America and Europe, ChargePoint is one of the biggest EV charging companies in the world. The company claims to control 70% of the public level 2 charging market share in North America.
Like other EV charging providers, ChargePoint isn't profitable right now. It hopes to generate positive EBITDA in 2024. Though a well-functioning public charging network is essential for the growth of EVs, the model for development of this infrastructure is still evolving. Some EV makers, such as Tesla, are developing their own charging networks. Others, such as General Motors, are partnering with several public EV charging companies, essentially suggesting that all chargers are basically the same.
EV charging companies, in turn, are finding innovative ways to generate revenue while continuing to expand their infrastructure. This infrastructure, if properly developed and maintained, should surely be of value in the future. As a top player, ChargePoint could be better placed than others to benefit from the expected growth in EVs. You wouldn't want to miss watching how this company evolves over time.
Fuel cells have certainly attracted investors' attention lately. However, makers of proton-exchange membrane (PEM) fuel cells, such as Plug Power, remain the primary focus. That's because PEM fuel cells find applications in the transport segment due to their quick start and stop times, as well as their lighter weight.
However, another key area for fuel cells that doesn't get so much interest but is of great significance is stationary baseload generation and back-up power. Bloom Energy (BE -0.90%) is primarily focused on this segment. It is also expanding into carbon capture technologies, marine transport, and hydrogen fuel cells and electrolyzers. Overall, the company pegs its total addressable market at over $2 trillion.
Bloom Energy fares better on key financial metrics compared to other fuel cell makers. In the last three years, the company has grown its revenue, shrank losses, and improved margins. Bloom Energy expects that its cash from operations will move toward positive territory for full-year 2021. It also expects to achieve non-GAAP operating margin of around 3% for the year. This overlooked stock definitely needs to be on your watch list of growth stocks.