Time to ditch QuantumScape stock?

QuantumScapehis (QS 1.68%) Solid-state battery technology could alleviate a number of problems or obstacles for electric vehicles (EVs), among other industries. Solid-state EV batteries would lower costs, increase range and improve safety — three critical components in whether consumers decide to buy an EV.

But the shine has worn off QuantumScape, with the stock down 72% over the past three years and even more if you judge by its all-time high. With no significant sales until at least next year, some investors have walked away, but is it really time to give up on QuantumScape?

Not so fast

Let’s briefly cover some reasons why investors may have walked away in the last couple of years.

First, the stock continues to decline. Investors may have bought at a deep discount to the company’s initial hype and thought it couldn’t go lower, but that’s a mistake. Despite being a pre-revenue company, QuantumScape’s market cap is still just over $3 billion — it can still lose a lot of value. Investors need a long-term mindset to own QuantumScape.

Second, some investors are increasingly concerned about a recession and the negative impacts it would have on the EV industry. While this is true of the EV industry in general, a recession would do much less damage to QuantumScape because it is not currently relying on sales revenue and would not have to worry about a cyclical downturn.

Third, without significant sales, investors are left to watch cash burn as the company accelerates development, testing and production. While it’s worrisome to see zero revenue and only capital expenditures, the company’s cash pile can fund operations through 2028. That leaves plenty of time for the company to reassess and raise new funds if needed.

Let’s switch gears and look at some of the recent progress and why it’s not time to give up on QuantumScape.

QS has delivered so far

For investors, it can often be frustrating to deal with management talk that often over-hypes and under-delivers. It can also be frustrating to deal with cost overruns, failed tests or long delays. But for the most part, QuantumScape has done exactly what it set out to do, which is to demonstrate its technology, record successful and impressive test results, and line up partnerships, and it has done so in a timely manner. reasonable.

Going a little further, investors can break two major stages down to what the company calls Raptor and Cobra, which are simply fancy names for two production stages. One of management’s key goals in 2024 was for its Raptor process to prove it could produce the highest-performing separators it produced at higher volume, and so far so good. Cobra will go one step further in 2025.

QuantumScape has ticked off several milestones since 2024, such as shipping unit cells with higher charge cathodes, improved cell packaging efficiency, and introduced its first commercial product, the QSE-5, all while improving production quality and consistency — two critical factors for achieving commercialization.

There is a way forward

If you follow QuantumScape, you’ve no doubt heard about its massive deal with The Volkswagen Grouphis battery company, PowerCo. This deal does several positive things for QuantumScape. It will bring royalty payments to certain technical progress, and licensing will enable commercial-scale production in a capital-light strategy.

In fact, the non-exclusive license will allow PowerCo to produce up to 40 gigawatt-hours (GWh) annually at first, which is enough for around half a million vehicles, with an option to double that output. What this really means for investors is that QuantumScape has proven its technology and manufacturing process enough that automakers are taking it seriously.

For investors, the main takeaway going forward is not to give up on QuantumScape, but to be patient. This was always going to be a long-term story, and the company is just now starting to hit milestones, partnerships and production that could become catalysts. It’s important to remember that the company has largely met its goals and continues to make significant progress, but its stock is not for the risk-averse or short-term investor.