QuantumScape (QS +2.75%) was once considered a promising play on the solid-state battery market, but its stock has tumbled more than 70% over the past three years. Like many other start-ups that went public by merging with special purpose acquisition companies (SPACs) in recent years, QuantumScape overpromised and underdelivered.
QuantumScape originally claimed it could commercialize its first batteries by 2024, but it still hasn't sold a single battery yet. But could its stock bounce back over the next three years as it finally starts mass-producing its batteries?
Image source: Getty Images.
What happened to QuantumScape over the past three years?
QuantumScape develops solid-state lithium-metal batteries that generate power from solid electrolytes instead of the liquid electrolytes used in lithium-ion batteries. Solid-state batteries are more resistant to higher temperatures and charge more quickly than their lithium-ion counterparts, but they're also much more expensive to produce.
QuantumScape's QSE-5 batteries have an energy density of more than 800 Wh/L (watt-hours per liter) and can be charged from 10% to 80% in less than 15 minutes. By comparison, most lithium-ion batteries have an average density of 300-700 Wh/L, and they usually require 20 minutes to an hour to be charged to 80%.
NASDAQ: QS
Key Data Points
Volkswagen is one of QuantumScape's top investors, and it's been co-developing those batteries with the company for over a decade. But even with that support, the company is struggling to ramp up its production. Instead, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) remains negative, and it's racking up wider net losses every year.
|
Metric |
2022 |
2023 |
2024 |
|---|---|---|---|
|
Adjusted EBITDA (in millions) |
($249) |
($249) |
($285) |
|
Net loss (in millions) |
($412) |
($445) |
($478) |
Data source: QuantumScape.
Yet, QuantumScape still has an enterprise value of $1.9 billion, which suggests its investors expect it to eventually generate meaningful revenue when it commercializes and mass-produces its first batteries.
The company still had $911 million in total liquidity at the end of 2024, and it insists that cash runway can last through the second half of 2028. It also says, "Any additional funds from customer inflows or capital markets activity would further extend this cash runway." In other words, QuantumScape won't go bankrupt anytime soon.
What will happen to QuantumScape over the next three years?
QuantumScape started shipping some low-volume samples to select automakers in the second half of 2024. It plans to ship even more advanced samples in 2025 as it transitions from its current Raptor separator process to its more advanced Cobra separator process -- which should improve its cell reliability, boost its product yields, and pave the way toward mass production and commercialization of its QSE-5 batteries.
The company aims to ship its first commercial batteries in 2026. If it finally crosses that milestone, analysts expect it to generate $4 million in revenue for the year. But in 2027, they expect its revenue to surge to $94 million as it ramps up its deliveries.
In its original SPAC presentation, QuantumScape claimed its revenue would reach $14 million in 2024, $39 million in 2025, and $275 million in 2026 as it scaled up its business. That clearly didn't happen, but that original forecast gives us a rough idea of how quickly it might expand after it mass-produces its first batteries.
So let's assume QuantumScape matches analysts' expectations through 2027 and nearly triples its revenue to $275 million in 2028. If that happens, investors might value it as a hypergrowth stock again at roughly 20 times sales by 2028 and drive its enterprise value to $5.5 billion. That means its stock could nearly triple over the next three years.
But investors shouldn't get ahead of themselves
Unfortunately, QuantumScape's business could still crumble if larger competitors -- including Toyota, Nio, and BYD -- successfully mass-produce their own solid-state batteries first. That nascent market is rapidly evolving.
Like QuantumScape, Toyota aims to launch its first solid-state battery vehicles in 2026. Last year, Nio launched a "semi-solid-state" battery that lasted for 554 miles on a single charge. BYD recently announced a solid-state battery that can be charged in just 10 minutes, as well as a new charging stall technology that can fully charge an EV in five minutes.
QuantumScape is supported by Volkswagen, but it hasn't yet proven that its business model is sustainable. So while its stock could triple by 2028, it could also easily shed over two-thirds of its value -- and still be expensive -- if it can't commercialize its products.
