What happened
QuantumScape (QS 2.67%) ended this week on a solid note, rising 15.8% through 2 p.m. ET Friday, according to data provided by S&P Global Market Intelligence. I don't remember seeing this electric vehicle (EV) battery stock end with double-digit weekly gains since early February, so what's behind the big move? A speculation that investors believe may not be speculation after all.
So what
QuantumScape rocketed the afternoon of March 28 when an article from German business monthly, Manager Magazin, reported Porsche to be working with QuantumScape for solid-state batteries to power an electric version of its 911 sports car.
Porsche is a Volkswagen (VWAGY +1.17%) brand, and 911 a hugely popular car. More importantly, Volkswagen is already QuantumScape's key partner, so investors have a valid reason to believe the monthly's claim.
Image source: Getty Images.
QuantumScape and Volkswagen, in fact, have been partners since 2012. Over the years, Volkswagen has successfully lab-tested several generations of QuantumScape's single-layer and multi-layer solid-state battery cells and invested $300 million in the battery maker so far. Last year, the two companies also agreed to jointly develop a solid-state battery pilot-line facility.
It's highly likely, therefore, that Volkswagen will be the first company, if at all, to commercially use QuantumScape's battery technology in its vehicles. That also explains why investors in QuantumScape saw merit in Manager Magazin's report and bought the stock.
This week, QuantumScape also received some attention from SMBC Nikko Securities' analyst Srini Pajjuri, who sees strong potential in the company's solid-state battery technology to disrupt the $170 billion EV battery market thanks to lower costs and charging times, according to TheFly.com. Pajjuri, therefore, initiated coverage on QuantumScape stock with a price target of $20 a share. The market was quick to react, and the stock shot up to that price point on Tuesday and has been hovering around that level since.
Now what
QuantumScape's lithium metal solid-state battery technology shows promise given its claims of greater energy density, higher safety, longer life, and faster charging versus the traditional lithium-ion batteries that currently power most EVs. QuantumScape has been able to convince and sign up four top global automakers, including Volkswagen, to test its battery cells.
NASDAQ: QS
Key Data Points
The EV industry is only just getting started, and any company building products and services to challenge existing ones is bound to get attention from growth investors. That explains QuantumScape's current market capitalization of nearly $8.6 billion despite the company being years away from commercial production.
