Buy QS Stock? Yes! The Bull Case for QuantumScape.
As it is with just about any disruptive company, there are critics and doubters of electric vehicle (EV) battery manufacturer QuantumScape (NYSE:QS). Yet, if you’re willing to do some due diligence, you can construct a rock-solid bull ca…
As it is with just about any disruptive company, there are critics and doubters of electric vehicle (EV) battery manufacturer QuantumScape (NYSE:QS). Yet, if you’re willing to do some due diligence, you can construct a rock-solid bull case for QS stock. You might be surprised to discover that QuantumScape is sufficiently capitalized, and that the company’s solid-state battery technology could transform the EV industry as we know it.
Some folks like to invest in EV makers; others prefer to buy shares of companies that make EV batteries. It’s fine to invest in both types of businesses, actually. If you’re going to pick a battery maker, though, then it ought to be one that has a long-term road map and top-tier technology.
QuantumScape checks those boxes and is willing to restructure itself in order to maintain its viability during the coming years. So, before you think about joining the naysayers, I invite you to take a closer look at QuantumScape’s considerable strengths.
QS Stock Falls Despite Better-Than-Expected Net Loss
Plenty of financial traders, including some large-scale stakeholders, undoubtedly paid close attention when QuantumScape revealed its fourth-quarter 2022 financial results. Judging by QS stock’s post-earnings-release drop of 14%, you might assume that QuantumScape must have posted horrible results.
Yet, the results weren’t terrible. Indeed, QuantumScape’s net earnings loss of $109 million, or 25 cents per share, beat Wall Street’s consensus estimate of a loss of 29 cents per share.
If you were expecting QuantumScape to post a profit, bear in mind that the company is still advancing its solid-state battery. As Luke Lango explains in detail, QuantumScape’s battery could potentially be a “forever battery.”
Lango describes it as a “hyper-compact solid battery” with “zero wasted space and theoretically infinite energy density.” Consequently, QuantumScape’s solid-state EV battery could last longer and charge faster than conventional car batteries.
QuantumScape Has a Sufficient ‘Cash Runway’ to Fund Its Operations
Thus, QuantumScape isn’t profitable yet but could be an earnings juggernaut once its potential “forever battery” is commercialized. To that end, QuantumScape has already shipped out its 24-layer prototype lithium-metal battery cell to automotive manufacturers.
Now, the skeptics might point out that it could take a while for QuantumScape to bring its game-changing battery technology to market. There’s positive news on that front, however. QuantumScape assures that, due to the company’s “cost-saving initiatives, we believe our cash runway now extends into the second half of 2025.”
That’s a decent-sized runway, since it’s still fairly early in 2023. Moreover, QuantumScape is fully prepared to restructure its business in order to stay well-capitalized.
The company’s significant changes include “optimizing non-personnel resources,” which will involve reducing some of QuantumScape’s outlays in services, materials and utilities. Additionally, there will be a “rebalancing” of QuantumScape’s personnel. Most likely, this means the company will eliminate some roles.
The Bull Case for QS Stock Is Powerful
Investing in QuantumScape will require patience and a willingness to tolerate volatility. After all, disruptive businesses need time to develop and commercialize their innovative products.
QuantumScape’s quarterly bottom-line result was better than expected, and the company is advancing a battery with “forever” potential. Plus, QuantumScape’s “cash runway” should enhance the shareholders’ confidence in the company.
So, there’s no need to let the doubters and skeptics dissuade you from taking a share position in QuantumScape. The bull case for QS stock remains quite strong as QuantumScape relentlessly pursues best-in-class EV battery science.
On the date of publication, David Moadel did not have (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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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