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Stock QS: It’s too early to fish the bottom with Quantumscape

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It may be an electric vehicle (EV) battery manufacturer rather than an EV manufacturer, but QuantumScape (NYSE:QS) has taken investors on a wild ride during its relatively short life as a public company. Shortly after the Special Purpose Acquisition Company (SPAC) merger went public, QS stock was trading at prices well over $100 per share.

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Even after its initial dip last spring and summer, this electric drum set has picked up steam. Following the passage of the bipartisan infrastructure bill in November, shares rose from less than $25 to more than $40 per share.

Unfortunately, this did not mark the start of a comeback. Instead, with the Federal Reserve’s rate hike plans reducing the appeal of growth stocks, QuantumScape plunged further in the final weeks of 2021. Since the start of the new year, stocks have continued to decline . At around $18 per share today, the market continues to cool on this former “hot stock”.

Since mid-November, it has fallen by around 61%. Since hitting an all-time high on Christmas Eve 2020, it’s down 86%. Investors playing long-term with the electric vehicle megatrend may now see the perfect time to buy this stock on the cheap. However, still valued primarily on the potential of its solid-state battery (SSB) technology, it has more room to fall before it’s a bargain.

Last positive for QS Stock

So far in 2022, QuantumScape has had a mix of positive and negative news. First, the positive. Earlier this month, the battery maker announced plans to go beyond just supplying batteries for electric vehicles. In partnership with Fluency Energy (NASDAQ:FLNC), the company will offer rechargeable SSBs for stationary power applications.

This is positive for QS stock and its long-term outlook. Stationary energy is perhaps more of a side business today. Still, it could become an opportunity as EV batteries. The total addressable market for the company’s technology could turn out to be much larger than previously thought.

Even so, news like this doesn’t give short-term stocks a charge. Instead, the market cycle out of play growth due to rising interest rates prevails. The same applies to a negative development directly affecting the company.

Like InvestorPlace Samuel O’Brient reported that news of a judge allowing a shareholder lawsuit to continue against the company caused the stock to drop sharply again on January 19. The lawsuit alleges that QuantumScape misled investors regarding the quality/performance testing of its batteries. It is too early to tell whether the concerns about this lawsuit are true or false. But even if concerns about the lawsuit turn out to be overblown, stocks could continue to slide in the months ahead.

upside down limited

I can see why some investors may want to dive into QS stocks now. He went from “too hot to the touch” to disgrace, in no time. With that, it may seem like the stock has fallen to a price that underestimates the company’s long-term potential.

Assuming its SSB technology delivers as promised, this company could have annual revenue well into batteries. Especially since its partnership with volkswagen (OTCMKTS:VWAGY) will accelerate commercialization. Yet while its shares have been beaten, with its market capitalization of $6.64 billion, investors can still assess the company’s many advantages in the pre-income phase. possibilities like certainties.

Even if you assume its technology is the real deal, that alone can guarantee great success in its future. Like my InvestorPlace coworker Stavros Georgiadis argued in December that he still had to prove whether he could build large-scale SSBs. Its eventual sales could be well below lofty projections calling for up to $6.4 billion in annual sales by fiscal year 2028.

In turn, the upside potential of QS stocks may be lower than you think. A full return above $100 per share may never happen. Added to this limited upside is the possibility of a near-term downside, as rising interest rates continue to depress growth stock valuations. Put the two together, and the risk/reward proposition has some way to go before it backfires in your favor.

No bargains

Among the dozens of growth stocks that have plunged, there may be a few bargains. Perhaps not “bargains” in the value investing scene. But maybe bargains in the sense that they are more than reasonably priced for future growth. QuantumScape does not belong to this list at the moment.

Worth keeping an eye on. He will likely continue to make wild moves, back and forth. Still, until QS stock reaches the point where it has been truly oversold, it is best to hold off buying.

At the date of publication, Thomas Niel had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Thomas Niel, contributor for InvestorPlace.com, has been writing individual stock analyzes for online publications since 2016.

Stock QS: It’s too early to fish the bottom with Quantumscape

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