What happened
Solid state battery maker QuantumScape (QS +2.57%) may have finally reached its bottom and is using it as an inflection point to run higher. Shares closed 15.7% higher Monday after an analyst initiated coverage with a neutral rating.
UBS analyst Chris Snyder had said on Friday QuantumScape has a leadership position in a technology looking to disrupt a $300 billion industry, along with establishing relationships with key auto industry original equipment manufacturers (OEMs). All Snyder wants to see is QuantumScape hitting its marks on commercialization. He set an $18-per-share price target, some 27% above where the stock had previously closed.
Image source: Getty Images.
So what
It's possible QuantumScape could run away with the electric car market if testing continues to confirm already existing data that shows its revolutionary lithium-ion batteries enable the Holy Grail of ultra-fast charging while eliminating the risk of fires.
Numerous independent test labs have confirmed QuantumScape batteries can charge to 80% capacity in just 15 minutes and are completely safe. Volkswagen is apparently sold on the technology, investing $300 million into the company to mass produce batteries for it through a joint venture.
And last quarter it announced a second major OEM had enlisted after testing QuantumScape's batteries on its own. The mystery company agreed to purchase 10 megawatt-hours of batteries, and while it's only a high-single digit million-dollar agreement now, QuantumScape sees it as a major long-term opportunity.
Now what
However, QuantumScape remains a fairly heavily shorted stock, even though shares are down 76% from their 52-week high. Some 43 million shares, or 16% of QuantumScape's shares outstanding, are sold short, though that amounts to a coverage ratio of less than three days (anything over seven is considered a lot).
QuantumScape is likely to remain a volatile stock as interest in electric car stocks surges and ebbs.
