QuantumScape seeks to disrupt the rechargeable lithium-ion battery.
Ronny Hartmann/AFP via Getty Images
There’s a lot of promise in QuantumScape’s electric-vehicle battery technology, but the stock price is just too steep for Wall Street. Goldman Sachs automotive analyst Mark Delaney launched coverage of the company Friday with a Hold rating and $42 price target. Shares are down in early trading Friday after his lukewarm review.
QuantumScape (ticker: QS) is looking to disrupt the already disruptive EV space by pioneering solid-state lithium anode batteries. The details are arcane, but Quantum’s technology has the potential to offer better range, safety, charging time, and power density than today’s lithium-ion batteries powering the current generation of EVs.
QuantumScape doesn’t plan to have significant sales for years, but its potential is huge. The company is worth almost $20 billion, making it one of the most valuable automotive suppliers in the U.S.
Delaney acknowledges the potential, but he has concerns. “The company has a very long time to market,” the analyst writes, noting that other battery manufacturers and start-ups are working on similar technology.
“There are several manufacturing and ramp challenges remaining,” he adds. The company will have to produce an automotive-size battery and demonstrate its effectiveness before advancing to in-car pilot testing.
For Delaney, there is too much reward and not enough risk reflected in the current valuation, which he calls “stretched.”
Quantum stock now has two ratings. One Hold from Goldman and one Sell from Bernstein analyst Mark Newman. The average price target of the two analysts is $35 a share, valuing QuantumScape stock at almost $16 billion, based on the company’s 448 fully diluted shares outstanding.
The stock is down 4.5% in recent trading, at $45.24 a share. The S&P 500 is up about 0.3% and the Dow Jones Industrial Average has added 0.2%.
Trading in Quantum stock has been wild. Shares have gone from roughly $14 to $130 and back to $45. That level of volatility probably has hurt the firm—even though stock trading is out of the company’s control. Volatility like that can scare off potential investors.
Extreme volatility should be a temporary phenomenon. But it likely means QuantumScape needs a few more analysts to pick up coverage to help build investor confidence in the technology and valuation.
Write to Al Root at [email protected]
