5 Reasons to Buy QuantumScape Stock in 2024

Quantumscape (QS -6.45%) We are trying to achieve with battery technology what has not been achieved until now. “Solid-state” batteries do not require the liquid or gel found inside traditional batteries, making them lighter, safer and more capable. The company is rare and a true potential game changer.

That said, QuantumScape is also a return transfer and the true definition of high risk and high reward. This investment is not for the faint of heart. If investors can stomach the high-risk part of owning QuantumScape’s stock, here are five things that could take the company from a dream to a dream-like return.

management incentives

A key part of finding a successful investment is finding management with incentives aligned with long-term company success. QuantumScape has this, and management milestones include completion of sample A and B prototypes of the technology, as well as longer-term milestones such as $10 billion in Generally Accepted Accounting Principles (GAAP) revenue and 20% global market share (excluding China). It’s possible.

There is a share price target of between $60 and up to $300 per tranche of milestones, a tantalizing return for the company before earnings, with shares currently trading in the single digits. These milestones are long-term oriented and achievable once QuantumScape demonstrates its technology at commercial scale. To be fair, it’s a big deal.

No anode

One of the advantages of QuantumScape battery technology is that the solid separator is designed to enable an anode-less architecture. That’s a complicated way of saying that the company’s batteries eliminate the anode material bill and manufacturing costs found in traditional lithium-ion battery cells.

In addition to cost savings, QuantumScape’s batteries can charge from 0 to 80 percent in half the time compared to most lithium-ion EV batteries today and have up to 80 percent more range than current batteries of similar weight.

Successfully achieving this technology with commercial production level quality standards will give the company a significant cost of goods sold (COGS) competitive advantage.

strong partnership

QuantumScape already has strong partnerships within the automotive industry. It is deeply related to Volkswagen Since 2012, it has included a 50/50 joint venture to accelerate the commercialization of the company’s solid-state batteries. It’s also non-exclusive, meaning Volkswagen has first priority on the technology, but QS can explore commercial opportunities with other car manufacturers.

In addition to Volkswagen, QS has signed deals with two other top 10 original equipment manufacturers (OEMs), two global luxury car manufacturers and one pure electric vehicle company.

Beyond EV

Currently, QS is focusing on battery technology for EVs. This is an incredible application as EVs are currently transitioning from early adopters to mainstream. But one day, the technology may surpass EV batteries. It has the potential to be applied to the home appliance market, including fixed storage spaces, smartphones, and wearables, and management is already collaborating with leading global home appliance companies.

cash runway

The obvious risk of investing in a company like QS is that the technology development will fail or the company will run out of cash before the product can generate the revenue and cash flow to support the larger ambitions of the business.

QS is still several years away from launching a commercial product, but assuming the technology is developed to the required quality and consistency, the company’s current business model should free up cash to operate through 2026.

Can QS hit its $60 target?

“If QuantumScape can mass-produce this technology, it has the potential to transform the industry,” Stan Whittingham, co-inventor of the lithium-ion battery and winner of the 2019 Nobel Prize in Chemistry, said in a QuantumScape press release.

QS is a pre-revenue company that is facing many challenges in proving its technology and producing it at commercial scale. This is not an investment for the faint of heart and is still speculative.

But if the company can hit a few management milestones with a sample prototype, it has the market tailwinds for EVs, strong partnerships, and the cash to give investors reason to believe the stock could soar in the coming years. It will.