QuantumScape (QS +5.68%), a developer of solid-state batteries, went public nearly five years ago by merging with a special purpose acquisition company (SPAC). Its stock opened at $24.80 on its first day but now trades at about $16.
The stock fizzled out because the company missed its own goal of commercializing its first batteries by 2024. The company has neither commercialized those batteries nor generated any meaningful revenue yet, but is still racking up steep losses and issuing more shares.
That makes the company, which has a market cap of $9.8 billion, a speculative investment that's difficult to value. But could it bounce back and generate big multibagger gains over the next five years? Below, I'll review the company's business model, its potential growth rates, and its valuations to decide.
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How does QuantumScape plan to make money?
QuantumScape develops solid-state batteries that run on solid electrolytes instead of the liquid electrolytes used in lithium-ion batteries. These batteries have higher charging capacities, shorter charging times, and can resist higher temperatures than their lithium-ion counterparts, but they're also more expensive and challenging to manufacture.
Solid-state batteries have already been produced for smaller devices like pacemakers and wearables, but they haven't been mass produced for mobile devices or electric vehicles (EVs) yet. QuantumScape aims to make that leap with its QSE-5 batteries for EVs.
NASDAQ: QS
Key Data Points
The QSE-5 battery has an energy density of 844 Wh/L (watt hours per liter) and can be rapidly charged from 10% to 80% in 12.2 minutes. By comparison, most lithium-ion batteries for EVs have an average density of 300-700 Wh/L and an average fast-charging time of 20 minutes to an hour.
QuantumScape has been co-developing those batteries with its top investor Volkswagen for over a decade. Based on the road tests conducted by Volkswagen's battery subsidiary PowerCo, the QSE-5 can retain over 95% of its energy capacity after 1,000 charging cycles. That's well above the industry standard for retaining an 80% energy capacity after 700 charging cycles.
The company is shifting from its older Raptor separator process to its new Cobra separator process to boost its cell reliability, equipment productivity, and total yields. That upgrade will allow it to ramp up the high-volume production of its samples for interested automakers.
QuantumScape originally planned to manufacture and sell its own commercial batteries. But last July, it abandoned that capital-intensive strategy and decided to license its technology to other automakers to generate higher-margin royalties and licensing fees. Its first customer will be PowerCo, which will license its designs to produce Volkswagen's first solid-state batteries.
This July, QuantumScape expanded its partnership with Volkswagen and secured additional milestone payments to extend its cash runway through 2029. That deal should give it more breathing room to ship out more samples and lock in more automotive customers.
Where will QuantumScape's stock be in five years?
Analysts expect QuantumScape to finally generate $4 million in revenue in 2026 and $59 million in revenue in 2027. That rosy outlook assumes it can successfully ramp up its high-volume sample production, lock more automakers into its licensing deals, and successfully commercialize its battery designs before similar companies, like Blue Solutions and big automakers like Toyota and Nio, launch their own solid-state batteries.
This nascent solid-state battery market could expand at a staggering compound annual growth rate (CAGR) of 56.6%, from $1.18 billion in 2024 to $15.07 billion in 2030, according to Grand View Research. Therefore, there could be plenty of room for all of these battery makers to thrive without trampling each other.
However, even if QuantumScape matches analysts' estimates through 2027, continues to grow its revenue at a CAGR of 30% through 2030 to $129 million, and trades at a generous 30 times sales by the final year, its market cap would still decline more than 60% to $3.86 billion. That might seem odd, but it's probably because too much growth has already been priced into this pre-revenue company in this frothy market.
QuantumScape might have a bright future, but I don't think its stock will set fresh record highs over the next five years. For now, it's a stock worth watching -- but I wouldn't consider it an attractive long-term investment unless its valuations cool off or its growth accelerates at a much faster rate.
