What happened
Solid state battery maker QuantumScape (QS 5.10%) 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.
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.