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QuantumScape (NYSE:QS) stock supports a next-generation battery technology developer aiming to revolutionize the EV charging sector with solid-state batteries.
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Despite its pre-revenue status, QuantumScape is well-funded and continues to execute its plans effectively to gain the confidence of its stockholders.
Although several risks remain with its business, it is doing well to dispel the concerns of its potential investors. Moreover, QS stock is trading at a significant discount at this time, which makes it an attractive bet at this stage.
The company has had a rocky start as a listed company. It surged to over $100 per share at one point in 2020 before steadily declining to its current price to a little more than $27 per share.
Its current price is more in line with its IPO price. That puts its price to book value at a reasonable 8.4 times considerable value proposition. Its battery solution could enable the widespread adoption of EVs across the world.
On the Path to De-risking
A lot has been made about QuantumScape’s business model and its long-term viability. The only way to prove its naysayers wrong is to continue to achieve its technological and infrastructural milestones.
It recently produced a larger form factor four-layer cell that matched a smaller four-layer and single-layer cell. The larger form is of a more “commercially relevant” size.
Furthermore, the company recently announced the doubling of its capacity to over 200,000 cells per year. The massive increase in capacity is driven by the higher OEM interest. The company has signed on the facility to produce its cells and expects to deliver samples from this line by 2023.
Looking ahead in 2021, it plans to complete its testing of the larger form factor 4 layer cells. Moreover, it plans to produce 8-10 layer cells by the conclusion of the year. So far, it’s on track to produce commercial samples by 2022.
Growth Catalysts and Risks
If QuantumScape can commercialize solid-state batteries in the EV battery market, it could grab a huge chunk of the market.
The EV battery industry could be worth $82.8 billion by 2026. Moreover, it appears to be the front runner in the development of solid-state batteries despite the competition.
QuantumScape can effectively publish the results of its testing in both multi-layer and single battery cells.
The company is well-funded at this stage, according to its first-quarter report this year. It has current total asset positioning of roughly $1.6 billion.
Another key element to consider is that automotive giant Volkswagen (OTCMKTS:VWAGY) and Bill Gates back the company. Hence, with support from such big names, it’s clear that the company should have enough funds to complete its milestones without any hiccups.
QuantumScape is a pre-revenue enterprise with expectations of commercial production in 2024 at the earliest. The progression of QS stock is naturally dependent upon its ability to meet its objectives consistently and hit all its deadlines.
If it can continue on this path of de-risking, then the stock can have a lot of long-term value for investors. However, investors need to be confident about whether these deadlines will be met or not.
Final Word on QS Stock
QuantumScape is en route to solving a decades-long problem in the EV battery space.
Its recent progress is a testament to the massive strides it has made in the past couple of years in developing solid-state batteries.
The company needs to continue delivering on its promises and ensure it meets its targets. Moreover, the recent pullback in its price provides an attractive entry point for investors to invest in the stock for the long haul.
On the date of publication, Muslim Farooque 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.
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