What happened

QuantumScape (QS -1.38%) shares had a good month in February. But while the stock rose 12.5% for the month, according to data provided by S&P Global Market Intelligence, it had spiked nearly 40% at its peak in February.

That surge higher came as investors piled into shares ahead of the quarterly update from the electric vehicle (EV) battery technology company. 

So what

While the company updated investors on progress toward commercializing its solid-state batteries for the EV sector, it also acknowledged some challenges that pushed some investors out of the stock. 

The best news out of the company was that it has shipped its first 24-layer prototype battery cells to customers in December 2022. It took the company two years from developing its single-layer solid-state lithium-metal chemistry to successfully prove the concept of multilayer cells and finally achieve the 24-layer version that automotive manufacturers can test for the EV manufacturing process.

Now what

While the start of testing with the 24-layer cells is a hugely positive development for the upstart company, there was also some indication of continued challenges. In its fourth-quarter 2022 shareholder letter released last month, the company stated, "we can report that generally, most cells have performed well on initial testing, including fast charge and early cycle capacity retention; however, we must continue to improve cell reliability as we move from prototype to product."

Investors who enjoyed a sharp run-up in the stock leading up to the Feb. 15 report appeared to have taken that last line as a sign to take profits. QuantumScape remains a highly speculative investment as it is still several years away from generating revenue. So taking some gains might have made sense for some who want to de-risk their portfolios.  

QuantumScape 24-layer battery cell in lab workers hand.

Image source: QuantumScape.

But for those with proper allocations and a long enough time horizon, the overall news was good from QuantumScape. Over the course of 2022, the company added agreements with three more automotive manufacturers. Management said that included a top-10 global automaker by revenue as well as a pure-play EV maker. 

QuantumScape also listed its top priority goals for 2023. They included increasing cathode capacity loading and improving cell packaging efficiency to realize higher power rates from batteries. It also wants to improve production quality and consistency and deploy a new "disruptively faster and more scalable film production process." 

For now, some investors seemed to be a bit disappointed with the company's latest report. The stock did move higher in February, but it pared back the more significant gains leading up to that update. Investors who believe in the future of its technology should ensure they maintain an appropriate allocation to this speculative name.