What happened
QuantumScape (QS 4.89%) stock was on fire today, jumping as high as 11.5% as of 2:30 p.m. ET. Shares of the electric vehicle (EV) battery start-up popped late afternoon yesterday on a speculative report about a potentially big partnership, and extended their gains today after an analyst started coverage on the stock.
So what
QuantumScape is a young company that's yet to prove the viability of its business model and start production, but its solid-state battery technology for EVs has already made a few heads turn. Volkswagen is one of the first big automotive companies to see promise in QuantumScape and has already invested hundreds of millions of dollars in the start-up.
If the latest from German business monthly Manager Magazin is to be believed, QuantumScape's multilayer solid-state lithium metal battery cells could find their way into the electric version of Porsche's 911 sports car. Porsche is a Volkswagen brand.
In its latest article, the business monthly claims Porsche is reportedly working with QuantumScape to develop an electric version of the 911 that could be powered, at least partly, by solid-state batteries.
Image source: Getty Images.
So far, QuantumScape claims to have signed agreements with four global automotive original equipment manufacturers (OEMs) to test and validate its battery cells.
The last such announcement came in early March when QuantumScape announced an agreement with a fourth OEM, also among the top 10 global automakers by revenue, without naming the company. On successful validation of its battery cells, QuantumScape will reserve at least 5 megawatt hours of capacity for this OEM at its first pre-pilot production facility. On further success, the two companies could even form a joint venture to set up a facility.
QuantumScape, in fact, already formed such a joint venture with Volkswagen last year. And given the long-standing partnership between the two companies, investors expect the Porsche rumor to be more than just a rumor.
Now what
Few analysts have covered QuantumScape so far, so the addition of any can fire up investor interest in the stock. The latest to join the line is Srini Pajjuri from SMBC Nikko Securities. The analyst initiated coverage on QuantumScape stock yesterday and sees the company's solid-state battery technology to have the potential to disrupt the $170 billion EV battery market by lowering costs and cutting charging times significantly, according to TheFly.com.
NASDAQ: QS
Key Data Points
Yet, Pajjuri sees high execution risk as QuantumScape is still years away from generating any meaningful revenue, and therefore gave the stock a neutral rating with a price target of $20 a share. Growth investors, though, see a big opportunity here, which explains why QuantumScape shares surged today and were hovering just above $20 a share as of this writing.
