Is QuantumScape a buy?

It’s time to break down a smaller name. Here is the break down on $QS, otherwise known as QuantumScape.

Current Price: $34.78

52/Wk High: $132.73

52/Wk Low: $9.74

Market Cap: $13 Billion

Read below for the breakdown!

QuantumScape ($QS) is a leading developer of solid-state lithium-metal batteries for the electric vehicle industry.

According to the company’s investor relations, QuantumScape’s mission is to “revolutionize energy storage to enable a sustainable future”.

In recent news, QuantumScape passed the final technical milestone to move forward on an investment deal with Volkswagen Group. The deal in total is worth $200 million between Volkswagen and QuantumScape.

The end goal of the Volkswagen deal is to get QuantumScape’s solid-state technology into full scale production.

Despite a solid deal with a major automaker, QuantumScape’s stock has been hit hard in recent months after a short-seller report targeted the company's technology claims and an offering of class A common stock.

In short, QuantumScape has fallen over 30% in the past three months and over 58% in the past year, leaving investors to wonder if QuantumScape is a buy.

Digging into the numbers, QuantumScape delivered a Q4 2020 EPS of $-2.41, missing the analysts EPS consensus estimate of $-0.03.

On the revenues front, QuantumScape is still in a pre-revenue and pre-production stage.

Shifting into expenses QuantumScape reported a $30.188 million loss from operations in Q4, nearly double the loss from operations in Q4 2019, which totaled $15.097 million.

As for net loss, QuantumScape reported a net loss of $694.742 million, much larger than the Q4 2019 net loss of $14.283 million.

Taking a brief look at the full year, QuantumScape reported an FY 2020 loss from operations of $81.021 million, much larger than the FY 2019 loss from operations of $55.818 million.

Management has big plans for the future and expects to spend $230 million to $290 million for further development of the multilayer cell project.

Leadership also noted that given the Volkswagen deal proceeds, QuantumScape should enter 2022 with a liquidity position greater than $900 million.

Sifting through QuantumScapes technology, the company is working to advance solid-state battery technology which will in the end allow for faster charge times, higher energy density, longer battery life span, and possibly lower costs.

In fact, in QuantumScapes most recent data release, the company’s solid-state separators worked at extremely high rates of power and resulted in 15 minute charge times to 80% without harming the battery itself or requiring higher operating temperatures.

Shifting into the balance sheet, the numbers aren’t bad.

Total Debt: None

Total Liabilities: $25 Million

Total Assets: $1.067 Billion

Cash & Short Term Inv: $998 Million

On a valuation basis, QuantumScape trades at a premium.

Price to Book: 8.11x

Given the numbers and data the analysts are bullish with a mean price target of $56.75/share, representing a 61.52% upside.

The high price target is $70.00/share, representing a 99.24% gain, while the low price target is $48.00/share, representing 36.62% upside.

The big money is less involved with just 36.20% of QuantumScape being owned by institutions. Top holders include Qatar Investment Authority, Volkswagen, and Fidelity Management & Research.

On a technical basis, QuantumScape could be presenting opportunity. According to the six-month charts the MACD continues to move with downside momentum within a tight range around -4.05.

The six-month charts are also indicating an RSI of 35.82 and CCI of -104.57, both of which are on the low end.

In short, QuantumScape ($QS) is definitely an investment for those who seek higher risk. While the future is bright for the EV industry, QuantumScape has much to prove and scale, and the path to profitability could be a long one.

EAT - SLEEP - PROFIT

Disclaimer: This is not direct financial advice, simply an opinion based on independent research.