QuantumScape (NYSE:QS) develops solid-state lithium-metal batteries for electric vehicles (EVs). Someday, QS stock might be worthy of a small-scale investment. For now, though, it’s a no-go because QuantumScape’s grand vision is much bigger than the company’s current capital position can accommodate.
QuantumScape was a darling of the retail trading crowd in the wake of the Covid-19 crisis. In late 2020, it seemed as if anything and everything tied to the EV movement was as good as gold.
Yet, gravity took hold during the tough months of 2022. QuantumScape’s investors have struggled and if they’re anticipating a huge turnaround in 2023, they should take a hard look at the battery maker’s financials and reconsider their long positions.
What’s Happening with QS Stock?
After topping out in December 2020 at around $115 per share, QS stock embarked on a painful, prolonged, multi-year slide. Recently, the shares traded for roughly $7 apiece.
Now is a good time to remind everyone of the Warren Buffett principle that price is what you pay but value is what you actually get. Just because QuantumScape shares are relatively low-priced, doesn’t mean that they’re a good value.
As we’ll discuss in a moment, QuantumScape’s value certainly doesn’t come from the company’s financial situation. Perhaps there’s value in QuantumScape’s dream of changing EV battery technology as we know it.
You’re encouraged to read the company’s most recent Form 10-Q. It might give you the impression that QuantumScape’s management is obsessed with adding more and more layers to its battery cells.
Will 16-layer and 24-layer battery cells become the gold standard in the EV battery industry someday? Maybe yes, maybe no. Just be aware that investing in QuantumScape is a gamble on a vision of the future that’s intriguing, but by no means assured.
QuantumScape Is a Risky Pre-Revenue Business
Before you get dazzled and distracted by 16 or 24 layers in a battery cell, be sure to read that Form 10-Q carefully and check QuantumScape’s financials. After doing that, you’ll probably be deterred from making an investment.
QuantumScape admits outright that it’s a pre-revenue company. Furthermore, the company has “an accumulated deficit of approximately $2.3 billion” from its inception through Sept. 30. That’s an alarming figure for a startup business, wouldn’t you agree?
Don’t expect that number to improve anytime soon. After all, QuantumScape expects to “incur significant expenses and continuing losses for the foreseeable future.” Moreover, QuantumScape swung from $15.351 million in net income during 2021’s third quarter, to a $117.653 million net loss in the third quarter of 2022.
What You Can Do Now
From a financial perspective, QuantumScape needs to improve dramatically in 2023. It’s fine for the company to develop multi-layered battery cells. However, QuantumScape’s lack of revenue will make it difficult for the company to achieve its operational goals.
Therefore, now is not the right time to take a chance on QuantumScape as an investor. QS stock gets a “D” rating, and could become a worthy holding someday if QuantumScape improves its financial situation.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.