Since its initial public offering (IPO) three years ago, shares of QuantumScape (QS 4.35%) have been on a wild ride. After trading as high as $132 in the weeks after going public, QuantumScape's stock has steadily fallen as investors have decided to unplug the maker of solid-state batteries from their portfolios.
But even though the shares are trading precipitously lower than they were a few years ago, bulls remain firm in their beliefs that QuantumScape can charge higher and make good on its ambition to disrupt the electric vehicle (EV) industry. Let's see how two Fool.com contributors break down the bull and bear arguments for the stock.
NASDAQ: QS
Key Data Points
Further progress toward commercial production is charging up the bulls' excitement
Scott Levine: While there are considerably more electric vehicles on the roads these days, a large number of drivers remain uninterested in eschewing their gas guzzlers. One of the main reasons for this hesitancy is the lack of interest in waiting for the EVs to charge. Another concern is range anxiety -- the fear of an EV running out of battery charge before reaching a destination.
QuantumScape's innovative solid-state batteries, however, are addressing both of these concerns. In fact, the company believes its batteries will be able to charge from 10% to 80% in only 15 minutes. Still, skeptics will often point to the fact that successful commercial manufacturing of these innovative batteries is a formidable task, making QuantumScape (as well as other solid-state battery stocks) undesirable. But QuantumScape has achieved several feats this year that suggest the company may prove the naysayers wrong.
For one thing, the company revealed in July that it shipped high cathode-loading unit cells to several automakers, an important step marking progress toward commercial production. More recently, QuantumScape reported that it remains on schedule with the testing of newly installed equipment, dubbed Raptor, that has the potential for 3 times as much throughput compared to the older equipment. When the new Raptor equipment is operational, QuantumScape will take an even greater stride toward ramping up its manufacturing capacity.
When QuantumScape does shift gears and begin commercial operations, it will likely hit the ground running. Including its partnership with Volkswagen (also its largest shareholder), QuantumScape is partnering with five leading original equipment manufacturers.
Since the company is in the pre-revenue phase of its development, traditional valuation metrics aren't useful. Nonetheless, with shares trading near their 52-week low, now seems like an ideal time for growth investors to consider picking up this disruptive stock.
QuantumScape is burning cash and diluting shareholders
Keith Noonan: In August, QuantumScape completed the sale of $300 million worth of new stock even though management had previously said that the company had enough cash to fund operations through the first half of 2025. The battery-tech specialist was going to have to raise capital at some point, but the offering clearly caught investors off guard.
QS Shares Outstanding data by YCharts
While the move did dilute existing shareholders, the roughly 44% sell-off that the stock has seen following the offering's announcement far outstripped the dilutive impact. Investors seemingly interpreted the stock offering as a signal that QuantumScape wasn't confident in its ability to meet financial and production development targets -- and so it was raising capital when its share price was still relatively high.
It's possible that the market has overreacted to the new stock offering, but recent volatility highlights the company's uncertain outlook. While QuantumScape has sent prototypes to potential customers and says it has a prospective launch partner, the business is still in a pre-revenue state. The company has posted a net loss of roughly $221 million across this year's first half, and it's reasonable to expect that losses will accelerate substantially even in favorable production-ramping scenarios.
QuantumScape's technology is undeniably promising. The company's solid-state lithium-metal batteries could deliver substantial improvements in terms of charging, energy density, and safety compared to existing lithium batteries. In turn, the company's tech could significantly speed the adoption for electric vehicles and open the door for growth opportunities in other categories.
On the other hand, the company's performance trajectory is highly speculative. The battery specialist has been leaning on new stock offerings to improve its balance sheet, and it will likely continue burning cash and relying on dilutive share sales. QuantumScape also faces competition in its niche, and it's possible that Solid Power or other rivals will curb its growth opportunities.
Should you power your portfolio with QuantumScape stock?
Like many companies that have the potential for disruption, QuantumScape has received ardent support from bulls and passionate rejection from bears. For investors who are comfortable with a more speculative investment, now seems like a particularly appealing time to pick up shares.
Those who have a more conservative bent, however, will want to watch QuantumScape's story play out from the sidelines in light of, among several things, its inability to generate cash organically, resulting in shareholder dilution. Even on the heels of big sell-offs, QuantumScape is a risky stock with the potential for substantial downside at current prices.
