After losing nearly 61% of their value between August and October, shares of QuantumScape (QS 5.69%) rebounded in November and surged 21.5%, according to data provided by S&P Global Market Intelligence. Investors saw an opportunity to buy the battered electric vehicle (EV) battery stock after it lowered losses and provided an encouraging product update.
QuantumScape's announces impressive battery testing result
QuantumScape announced its third-quarter numbers in late October. While the company is still developing solid-state lithium-metal batteries and is yet to generate any revenue, it reported a net loss of only $0.23 per share in Q3, versus $0.27 a share in the year-ago quarter, and that number handily beat analysts' estimates. QuantumScape's loss narrowed because of higher interest income and a one-time unrealized gain on marketable securities.
QuantumScape's numbers, however, don't matter as much right now as the company's progress toward the commercialization of its technology. While commercialization could still be years away, QuantumScape often shares testing data from third parties, and its latest update looks particularly interesting.
During its latest earnings release, QuantumScape said its best-performing A0 prototype cell had achieved more than 1,000 full-cycle equivalents with over 95% discharge energy retention at a prospective customer's battery testing lab. That result surpasses QuantumScape's commercial target of 800 cycles with 80% energy retention, and is meaningful since the A0 prototype uses the same proprietary format as QuantumScape's first commercial product, QSE-5.
QSE-5 is a solid-state 5 Amp-hours battery. QuantumScape is already collaborating with a prospective automotive customer for the commercial launch of QSE-5 and also entered a technology evaluation agreement with a "leading global consumer electronics player" in Q3.
Is it time to buy QuantumScape stock?
Solid-state battery is a promising technology, and QuantumScape is one of the front-runners. With its prototype exceeding testing targets, investors' expectations from the young company just got a boost. Meanwhile, the Department of Energy (DOE) earmarked up to $3.5 billion in funding in November to boost domestic production of batteries and battery materials as a step toward the Biden administration's target of a net-zero emissions economy by 2050. Electric vehicles should play a key role, as the administration expects EVs to make up 50% of all new light-duty vehicle sales by 2030.
Also, although QuantumScape is burning cash, it ended the third quarter with more than $1.1 billion in liquidity and believes it is enough to fund operations through 2026. Young companies in the development stage are often cash-strapped, so finding an exception in QuantumScape is one of the reasons why investors are betting on the EV stock.
That said, it's still a long road ahead for QuantumScape as it builds batteries and commercializes them, and a lot could go wrong in between. This means QuantumScape stock is a buy only if you're willing to speculate on the company's success and take a risk.
