Electric vehicle battery stock QuantumScape (NYSE:QS) soared more than 40% Thursday after one of the company’s big investors — German auto giant Volkswagen (OTCMKTS:VWAGY) — announced that QuantumScape’s solid-state lithium-metal battery passed a key endurance test.
PowerCo, the battery subsidiary of VW, noted that the QuantumScape battery “achieved more than 1,000 charging cycles with still more than 95 percent capacity.” That is crucial for making EVs more viable for consumers. PowerCo CEO Frank Blome said that “these are very encouraging results that impressively underpin the potential of the solid-state cell.”
“The final result of this development could be a battery cell that enables long ranges, can be charged super-quickly and practically does not age,” Blome added.
This is clearly good news for QS stock and VW. But are QuantumScape investors getting a little too excited?
For one, the company is still in its nascent stages and may never go fully mainstream. QS founder and CEO Jagdeep Singh hinted as much in Thursday’s news release, pointing out that “we have more work to do to bring this technology to market.”
QuantumScape has ridden the wave of EV hype since the company went public in late 2020 via a merger with a so-called “blank check” special purpose acquisition company (SPAC). Remember them? Shares quickly rose from about $25 to a high of near $133 by December 2020.
But the stock crashed and burned in 2021 and 2022 before recovering a bit last year. Still, even after a rebound in 2023 and the big surge Thursday on the VW news, QuantumScape stock still trades for only a little more than $9 a share… nearly two-thirds below where the stock was trading in November 2020 when the SPAC deal closed and a staggering drop of more than 90% from its all-time high.
Yes, the VW news Thursday is encouraging. So is the fact that QuantumScape has other significant backers, most notably Microsoft (NASDAQ:MSFT) co-founder Bill Gates, VC giant Khosla Ventures and mutual fund powerhouse Vanguard. But this is still a highly speculative stock.
What the Future Holds for QS Stock
QuantumScape is expected to continue losing money for the foreseeable future, with analysts projecting an only slightly smaller loss in 2024 from 2023. None of the six analysts following QS have it rated a “buy.” (There are four “holds” and two “sells.”)
QuantumScape is also far from being the only firm with skin in the EV battery game. The QS-VW alliance may not be enough to make the company a viable long-term competitor to either Tesla (NASDAQ:TSLA), which has lined up several of the world’s top automakers to use its lithium-ion batteries, or BYD (OTCMKTS:BYDDY), the Warren Buffett-backed Chinese giant that recently surpassed Tesla as the world’s largest maker of EVs. BYD also has developed its own batteries.
Finally, it’s worth noting that more than 15% of the available shares of QS are being held short, another bearish sign for the long term but a likely catalyst behind Thursday’s huge surge. Short sellers betting against QS would have had to buy back the stock to cover their position in order to avoid losses. This short squeeze may not last. Investors need to be super careful.
As of this writing, Paul R. La Monica did not hold (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.