Admittedly, there’s some risk involved with a stake in solid-state electric-vehicle (EV) battery maker QuantumScape (NYSE:QS). This is a visionary company and QS stock isn’t really meant for extremely cautious investors.
Of course, not everyone’s a fan of QuantumScape. You might recall the time when Scorpion Capital claimed, “the company is no different than other recently exposed SPAC promotions and EV frauds.”
I suppose you could say that QuantumScape is a “love it or hate it” kind of company. But then, it’s also possible to take a more sensible stance, and a moderately sized position in QS stock.
After a deeper dive into QuantumScape, you might have a clearer picture of where the company might be headed. For all we know, the company’s EV battery technology could be a game changer someday — and the investors might have the last laugh.
QS Stock at a Glance
It has been challenging for folks who’ve held QS stock since the beginning of 2021.
This was a $50-ish stock in early January, but 2021’s first quarter made some investors seasick due to the up-and-down price action. Moreover, the buyers were rejected at the $65 resistance level in February and then again in March.
Then in late May, a slow, painful drawdown commenced as QS stock slid below $40, and then below $30. As of Aug. 30, the stock was down to $21 and change.
All of that being said, the current share price could actually be a favorable entry point. If there’s a break above $65 in the future, then today’s buyers could conceivably triple their investment.
Still, whatever you do, please don’t load up heavily on QS stock. A more sensible strategy would be to take a small position and just plan on holding it for a while — think of it as a long-distance trip.
Still Here, Despite the Criticism
You’ve got to hand it to QuantumScape. Even in the face of stinging criticism from Scorpion Capital, the company is still here and as bold as ever.
The company’s latest investor presentation offers a handful of statistics to remind the naysayers that QuantumScape is here to stay:
- Founded in 2010 (the company’s not a flash in the pan)
- Around $2 billion of capital investment
- More than 400 employees (this isn’t some back-office operation)
- Over 200 patents and patent applications (intellectual property can be highly profitable)
- QuantumScape’s batteries enable a fast charge in less than 15 minute fast charge (0% to 80%)
Furthermore, here’s a tidbit from QuantumScape’s second-quarter 2021 shareholder letter: this company is far from broke/insolvent.
In fact, the company ended the second quarter with over $1.5 billion in liquidity. Moreover, QuantumScape expects to start 2022 with more than $1.3 billion in liquidity.
Batteries to Power the Future
There will also be some folks who assume that QuantumScape isn’t earning any income at all. That’s actually not the case. For the three months ending on June 30, 2021, QuantumScape generated net income of nearly $81 million.
So, while the company did struggle with a net loss a year ago, that’s certainly not what’s happening today.
Yet, that wasn’t necessarily the most intriguing aspect of QuantumScape’s shareholder letter. There’s a possible breakthrough afoot, it seems, as QuantumScape had made, and is currently testing, the company’s first 10-layer cells.
Apparently, QuantumScape had previously set a goal of showing results from 10-layer battery cells by the end of 2021.
Hence, it’s encouraging to see that the company is already announcing its first 10-layer cells, perhaps ahead of schedule. Obviously, the introduction of 10-layer cells would represent a quantum leap over the four-layer cells for which QuantumScape produced test results in February.
Patience is advised, as it appears that this will be an ongoing, multi-year process:
“We will seek to continue to improve the performance of the 10-layer cells through the rest of 2021 … [and] demonstrate several dozen layers in 2022 and produce test cells for vehicles on our QS-0 pre-pilot production line in 2023.”
As always, patience and forward-thinking vision will be key to success as a QS stock investor. Don’t expect to see immediate results from QuantumScape’s battery technology. Innovation is a process, and it takes time to develop.
Granted, there are people who will continue to criticize QuantumScape, and they’ll point out the risks of owning shares in the company. The risks are duly noted. However, if you’re willing to hold on to a moderately sized position in QS stock long enough, the returns could be considerable.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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