Electric vehicles (EVs) have the potential to revolutionize transportation. While the technology is evolving, mass adoption still encounters hurdles -- mainly around charging times and driving range compared to traditional gas-powered vehicles.
QuantumScape (QS +1.32%) is dedicated to overcoming these barriers with its next-generation battery technology that enhances performance and efficiency. The company has hit some important milestones over the last year with its battery technology. That said, it's still pre-revenue, and the stock is down 96% from its all-time high price achieved in late 2020.
The beaten-down stock presents an intriguing opportunity for investors as it advances its technology. It is a high-risk, high-reward stock with an intriguing upside. Could investing in QuantumScape today pave the way to millionaire status? Let's dive into the company to find out.
NASDAQ: QS
Key Data Points
QuantumScape's battery technology could pave the way for mass EV adoption
QuantumScape develops advanced solid-state lithium-metal batteries that promise significant improvements in energy density, charging speed, and safety compared to traditional batteries. Volkswagen is a major partner in this endeavor, having invested over $300 million and established a 50-50 joint venture with QuantumScape to develop and scale up battery production.
This support from Volkswagen is crucial, as QuantumScape is still in the developmental phase and is pre-revenue as it doesn't currently have a finished product to sell. The company is working closely with Volkswagen's battery division, PowerCo, to advance its technology and eventually scale up its production capacity for these batteries.
One year ago, QuantumScape's batteries performed well in an endurance test by PowerCo. In these tests, it achieved 1,000 charging cycles with minimal wear, suggesting that an EV with this technology could drive over 500,000 kilometers (about 300,000 miles) without a noticeable reduction in range.
The company granted PowerCo the license to mass-produce battery cells based on its technology. Under the agreement, PowerCo can manufacture up to 40 gigawatt-hours (GWh) per year, with the option to double this production to 80 GWh -- or enough to outfit about one million vehicles per year.
This agreement does a couple of things for QuantumScape. For one, it received a $130 million prepayment of royalties, giving it a cash runway through 2028. It also allows the company to take a capital-light approach and reach scale faster than its previous arrangement with PowerCo.
What's next for QuantumScape?
QuantumScape continues moving forward and announced the low-volume production and shipment of its B0 sample cells, which have an energy density of 844 watt-hours per liter (Wh/L) and fast charging in around 12 minutes. In 2025, it plans to switch its process to enable higher-volume B1 sample production and ship those samples to customers. The company is also looking to expand its commercial agreements and is actively discussing this with two automotive original equipment manufacturers (OEMs).
The company is making good progress with its technology. However, it will continue to burn cash and is still a few years away from significant revenue. Analysts project it will have no sales this year, $3.8 million in 2026, and $52 million in 2027. Explosive growth is expected in 2028, with sales projected around $377 million.
Is QuantumScape a millionaire-maker stock?
For any stock to be a millionaire-maker, investors must consider several factors. What is the company's long-term growth potential? According to Straits Research, the solid-state battery market could grow by 36.4% compounded annually through 2032, which would bode well for QuantumScape's flagship product.
Another consideration is how much you are willing to invest in this position. For example, a $10,000 investment in QuantumScape today would have to grow by 58% compounded annually over the next decade to reach that coveted million-dollar threshold. These lofty returns could become a reality if the company can achieve scale and wide-scale adoption.
However, investors must also balance the explosive upside potential with the possible risks. QuantumScape faces intense competition from companies like Toyota and Nio, which also develop solid-state battery technology for their EVs. Not only that, but QuantumScape is two years behind its long-term goals, which were laid out a few years back. Further setbacks could be detrimental to the stock, so sizing your position appropriately is important.
Image source: Getty Images.
QuantumScape is the definition of a high-risk, high-reward stock. The company won't generate any meaningful revenue for a few years, and the stock will continue to experience volatility as it works to ramp up production and achieve commercial viability. Whether it is a millionaire maker depends on a variety of factors, including the success of its technology, wide-scale adoption, and the ability to grow profitably along the way.
As investors, your best bet is to save consistently and build your investment portfolio over time. It is important to maintain a long-term approach and create a diversified portfolio that includes a variety of investments, each with unique characteristics, of which QuantumScape could be a small part of that overall strategy.
