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After reaching an all-time high of over $130 per share during the SPAC boom of 2020, solid-state battery maker QuantumScape (NYSE: QS) has seen its stock plummet to less than $7 per share, marking a decline of more than 94% from its peak. This dramatic descent, while not unusual for post-SPAC companies, has been particularly severe for QuantumScape, ringing alarm bells for QS stock investors.
Throughout this decline, the company’s backers had largely stood by its side. However, QuantumScape’s key backer Volkswagen (OTCMKTS: VWAGY) may be considering alternative partners, as indicated by recent reports of discussions between Volkswagen and French solid-state battery maker Blue Solutions. The unsettling cash burn, which saw a staggering $354 million vanish in 2023, has left QuantumScape with a dwindling cash pile of $1.1 billion, enough to last through 2026. Nonetheless, any uptick in spending or failure to meet production deadlines could exacerbate investor anxiety.
Rumblings of Change at Volkswagen
QuantumScape continues to grapple with the challenge of bringing a commercial solid-state battery to market, despite extensive effort. Talks of a potential deal between Volkswagen and rival Blue Solutions have intensified concerns about the company’s future prospects, with Blue Solutions developing a solid-state battery that could attract Volkswagen’s attention. While Volkswagen has reaffirmed its commitment to QuantumScape, engaging with another battery maker signifies potential obstacles ahead, casting doubt on QuantumScape’s competitiveness.
Concerns are further amplified by advancing solid-state battery technology from rivals such as Toyota and Nio. Given QuantumScape’s lack of revenue and a $2.4 billion enterprise value, investors are justified in questioning the company’s valuation, even after its substantial decline from its peak.
What Lies Ahead for QS Stock?
The recent report indicating Volkswagen’s exploration of alternative suppliers, along with the uncertainties surrounding QuantumScape’s technology and finances, continue to fuel skepticism among investors. With relatively high research costs and the imperative task of proving the viability of its solid-state batteries, QuantumScape is embarking on a perilous journey akin to the early apprehensions about Tesla’s stock. Scaling up production will necessitate significant investments and entail risk from debt and equity offerings, meaning the stock’s performance hinges on the progress of its EV battery technology.
However, given the sluggish pace of development, Volkswagen’s reassessment of options and skepticism regarding the initial launch schedule, the consensus remains that QS stock remains a very high-risk investment.
Proceed with Caution
In the realm of electric vehicles, solid-state battery technology promises advantages such as faster charging and enhanced safety. Nonetheless, QuantumScape, with its delayed commercialization, finds itself trailing behind while other automakers delve into similar technologies. As Volkswagen potentially seeks alternative suppliers, investors would be wise to monitor developments closely and proceed with caution.
