Finance
Where will QuantumScape stock be in 1 year?
QuantumScape (NYSE:QS) published its second quarter report on July 24. Once again, the solid-state battery developer was not generating significant revenue because it had not yet brought any of its products to market. Net loss rose year over year from $117 million to $123 million, or $0.25 per share, and was two cents above analyst estimates.
On an adjusted profit before interest, taxes, depreciation and amortization (EBITDA) the loss increased from $64 million to $73 million. It reiterated its previous full-year expectations for an adjusted EBITDA loss of $250 million to $300 million, which would be slightly wider than 2023’s adjusted EBITDA loss of $249 million.
Shares of QuantumScape tumbled after that lackluster report, and are now trading 95% below the all-time high of December 2020. But could it recover in the next 12 months as it makes more progress toward commercializing its batteries?
What does QuantumScape do?
QuantumScape is developing solid-state batteries that generate power from solid electrolytes instead of the liquid electrolytes used in lithium-ion batteries. This difference allows them to be charged faster with higher capacities. They are also more resistant to higher temperatures, less volatile and last longer than their liquid-based counterparts.
Solid-state batteries are already used in smaller devices such as pacemakers, wearables and Internet of Things (IoT) gadgets, but are not yet widely installed in mobile devices or electric vehicles (EVs) because they are expensive to mass produce. QuantumScape aims to create an early mover advantage in this emerging market.
QuantumScape says its latest solid-state batteries can give EVs a range of 400 to 500 miles with a charge time of less than 15 minutes. By comparison, most lithium-ion batteries for electric vehicles have a range of about 300 miles with an average charge time of 30 minutes. That reach sounds like an ambitious goal, but… Volkswagen has been working with the company for twelve years to develop and market the first batteries.
When will QuantumScape start making money?
QuantumScape went public by merging with a special purpose acquisition company (SPAC) in 2020. Ahead of its public debut, it claimed it could generate $14 million in revenue by 2024 if it sold its first batteries. It also claimed that revenue would grow at a staggering compound annual growth rate (CAGR) of 363% between 2024 and 2028, reaching $6.44 billion.
But after several major delays, QuantumScape abandoned these ambitious goals. It doesn’t expect to generate significant revenue this year as it ships its first small prototype samples of its QSE-5 batteries to a few automakers. In 2025, the company plans to start shipping its samples in higher volumes, but analysts expect only about $5 million in revenue with an adjusted EBITDA loss of $304 million.
Analysts expect QuantumScape to generate $58 million in revenue with an adjusted EBITDA loss of $299 million in 2026 as it finally brings its first batteries to market. But even on that rosy forecast, the stock still looks expensive, at about 70 times sales in 2026 – and that’s assuming it can actually ramp up production.
Whether or not QuantumScape can achieve that goal is debatable. It initially had a head start as a pioneer in solid-state batteries, but it is already facing stiff competition from similar startups like Blue Solutions. Major car manufacturers love Toyota And Nio have also developed their own batteries. If QuantumScape cannot stay ahead of the competition in the next two years, it could become obsolete long before it can scale its operations.
On the plus side, QuantumScape recently signed a new agreement with Volkswagen’s PowerCo subsidiary to co-develop and license the upcoming batteries. It says the upfront royalty payments from that deal will extend its “cash runway through 2028.”
So will QuantumScape stock bounce back in a year?
QuantumScape stock is difficult to value, but Markets and Markets expects the solid-state battery market to grow at a CAGR of 41.5% between 2023 and 2030. If QuantumScape successfully commercializes and mass-produces its batteries, it could have a good shot at matching QuantumScape’s stock. or exceed the market’s long-term growth rate. These expectations could limit the downside at these levels as investors patiently wait for more developments in 2025 and 2026.
Therefore, I wouldn’t be surprised if QuantumScape shares remain around their current price through the second half of 2024. But in the first half of 2025, the stock could skyrocket as it finally starts generating meaningful revenue from its higher-volume samples. So for now, QuantumScape will remain a speculative stock, but its latest deal with PowerCo suggests it could generate multibagger profits over the next twelve months if it proves its business model is sustainable.
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Leo sun has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Volkswagen Ag. The Motley Fool has one disclosure policy.
Where will QuantumScape stock be in 1 year? was originally published by The Motley Fool
