Lukewarm sentiment and the public debut of a rival could send QS stock lower.
When I last wrote aboutQuantumScape(NYSE:QS) stock in May, I argued whyit was way too early to buy it. One month later? That’s still looking to be the case. The electric vehicle battery play was red hot late last year, when it briefly hit prices as high as $132.73 per share.
Yet so far this year, things haven’t been working in the stock’s favor. Excitement over in the then-incoming Biden administration implementing big changes to America’s clean energy has faded, as the U.S. Congresspicks apart his proposals. Speculators have moved on from chasing “green wave” plays, setting their sights on meme stocks, crypto and other trendy areas.
As a result, shares have seen a year-to-date decline of 67%. But what’s the forecast for the months ahead? Admittedly, a combination of good news and bad news. The good news is that for now, QS stock likely found its floor at between $25 and $30 per share (where it sits today).
The bad news? A few months from now, shares could resume trending lower. There are two factors (more below), that may cause yet another pullback.
Main Street and Wall Street areBlaséAbout QS Stock
Finding support at today’s prices, the current sentiment around QuantumScape shares is lukewarm. This is clear from recent sell-side ratings on the stock, such as a“hold” rating issued by Wolfe Research’s Rod Lache. Future ratings from other analysts could share similar “on the fence” sentiments. It’s not going to be until at least the late 2020s that this company’s underlying business starts to take off.
This blasé sentiment extends to the retail trading community as well. AsInvestorPlace’sIan Bezek discussed June 15, there was a temporary diving back into QS stock by the Reddit set, as they chased short-squeeze plays. Yet, as its short-lived rebound only took it from $24 to about $32 before it pulled back. It wasn’t exactly a “to the moon” moment.
Can this feeling change anytime soon? Don’t count on it. As we inch closer to the dog days of summer (when Congress recesses), and gridlock continues to hold up the aforementioned clean energy bill, expect this near-term catalyst to remain on hold until at least the fall.
And with it still being years away untilits solid state battery, or SSB, technologycould possibly supplant lithium-ion battery technology when it comes to EV use, its long-term potential may not be enough to send it zooming once again. Instead, based on what’s on the horizon, QS stock appears set to pull back further from here.
What Could Give Way to Lower Prices
Investors taking the long view may be willing to hold onto QS stock, waiting for its payoff later this decade. Given that a major force in the automotive space,Volkswagen(OTCMKTS:VWAGY) is in its corner. Its willing to havethird-party testing on its technology doneto prove skeptical short sellers wrong, so there’s likely substance to go along with the (albeit fading) hype around this early-stage company.
But that doesn’t mean QuantumScape shares will hold steady until its technology is ready for commercialization. We could see shares continue to slide in the coming months.
First, short interest may still be moderately high. But what if many of these bears covered their positions during its brief squeeze in early June? Shorts covering their positions could have been what kept shares holding steady over the past month.
Second, a new SSB play is about to hit the public markets. I’m talking aboutSolid Power, which will go public via a SPAC merger withDecarbonization Plus Acquisition Corporation III (NASDAQ:DCRC). This other early-stage solid-state battery play hasmany similarities to QuantumScape, including strategic partnerships withFord(NYSE:F) andBMW(OTCMKTS:BMWYY).
Not only that, its implied valuation ($1.2 billion) is much lower. This may make it a more reasonable bet on SSB technology than this stock, which today sports an $11.1 billion market capitalization. We could see some investors in QS stock rotate into Solid Power, which would put more downward pressure on shares.
The Bottom Line
Until Congress passes some (or all) of Biden’s green policy changes, retail investors will likely remain ho-hum about this “green wave” stock. Expect Wall Street’s sell-side to remain lukewarm about it as well.
Add in the upcoming debut of Solid Power, a similar (and more reasonably priced) SSB play and there’s little reason to go out and buy QS stock today. But if you’re still confident in its long-term success, wait for another pullback before you buy.