QuantumScape (QS): current situation and outlook

QuantumScape $QS, a manufacturer of solid-state lithium metal batteries, announced a significant milestone in the third quarter of 2024 - the start of production and delivery of the first battery test samples QSE-5 to its automotive customers. While this is an important step forward, the company still faces several challenges and hurdles to overcome before it can ramp up production and commercialize its products.

Current results and financial position

QuantumScape $QS still did not report any revenue in the third quarter as it has not yet been able to commercialize its products. The net loss increased year-over-year from $111 million to $120 million, which is in line with analysts' expectations. These figures are not surprising as the company is still in the research and development phase, but the start of production of test samples indicates some progress.

The solid-state lithium-metal batteries that QuantumScape $QS is developing have an energy density of over 800 Wh/L, significantly higher than traditional lithium-ion batteries. In addition, they can quickly charge from 10% to 80% in less than 15 minutes. These properties could significantly improve the range, safety and charging capabilities of electric vehicles in the future.

Challenges and barriers to scaling up production

QuantumScape $QS cannot yet ramp up production until it has made several significant upgrades. The company says it needs to improve cell reliability, yield and plant productivity, and switch to a new Cobra separation process to replace the current Raptor process . It plans to complete this transition by 2025, which could mean that meaningful revenue will not be generated until 2026.

Financial outlook and investment perspective

Analysts expect QuantumScape $QS to generate revenues of just $5 million in 2025, but with a net loss of $461 million. For 2026, they estimate that revenues will more than double to US$12 million, while the net loss will decline slightly to US$459 million. However, these estimates are dependent on whether the company can successfully complete testing and increase production.

The company has taken steps to secure financing. In July, it entered into a joint venture with PowerCowhich is expected to help extend the cash outflow until the year 2028. The move gives the company more time to expand production and prepare for commercialisation.

Valuation and investment risks

Even though QuantumScape $QS has reached a milestone with the start of test cell shipments, its stock remains a highly speculative investment. The enterprise value is $2.1 billion, which represents a valuation at 174 times projected 2026 revenues. Any further delays in production could increase this ratio and negatively impact the stock value.

In addition, the number of shares outstanding has increased by 45%since 2020 and QuantumScape $QS could issue additional shares to raise fresh capital. This, coupled with insider selling, raises further questions about the future stability and attractiveness of the company to investors.

Conclusion

QuantumScape $QS offers interesting long-term potential, especially with its innovations in high energy density semiconductor batteries. If the company can successfully complete trials, ramp up production and commercialize its products, it could disrupt the EV battery market. In the short term, however, investment in QuantumScape remains speculative, given the lack of sales, continued losses and the need for further investment in production.