QuantumScape (NYSE: QS) is a relatively small company that only employs around 200 people. But, this company has some high-value investors in the mix, including the likes of Bill Gates and Volkswagen. The reason it can count these names among its fans is due to the essential nature of its service in the EV industry. By researching and developing solid-state lithium batteries to be used in electric vehicles, this company should find itself in hot demand.
For this and more, QuantumScape is the one electric car battery company that I am buying right now!
QuantumScape does not earn any significant revenue yet, unfortunately, making this stock a leap of faith for any interested investor. Its latest earnings report showed earnings per share come in at -$0.20 for the quarter.
For the year, the company expects its cash spend on operations to come in between $260 million - $320 million, supporting development activities. However, it does expect to enter 2022 with $1.3 billion in liquidity gained from its stock offerings and funding by Volkswagen. Not bad for a company that is yet to produce tangible revenue.
The company puts a huge focus on research and development, as such, it has stated that the batteries it produces are the best in the business. It claims that its batteries are smaller, safer, faster charging, and denser than ones that are currently being used by EV makers. Due to their simplicity, the batteries should also be cheaper once they hit the market.
These smaller batteries could be a great draw for any company developing an electric pickup truck. Ford and Rivian for example, would benefit from QuantumScape's batteries as they will be space savers, allowing for more storage room in the car; something which is especially important in pickups.
However, whilst the previous point is speculation, Volkswagen is indeed betting big on this company as it has invested well over $300 million for a joint venture to produce its solid-state lithium batteries on an industrial level. Furthermore, VW and Ford's collaboration to produce commercial electric vehicles will help turn the above speculation more of a reality in the future. For QuantumScape it means that it will be a battery provider for two of the largest automakers in the world.
There are a few risks to QuantumScape's share price, including the fact that no company has yet been able to produce solid-state lithium batteries on a mass-market scale. For QuantumScape to achieve this it would need further investment and time to create a fully commercialized product.
Additionally, with this growing EV market competition is fierce and there are many companies out there developing new ways to increase EV battery's potential. This in combination with its overvalued share price and lack of revenue makes for a stock that will be highly volatile.
This stock has plenty of potential, particularly with its links to Volkswagen and Ford. If this company can eventually produce its smaller, safer, and faster-charging batteries it will be a huge win for the EV world.
Any investment in this company must be made with an awareness of the struggles QuantumScape will most definitely face and the volatility that is likely to hit its share price. However, as a long-term bet, this company could be a great asset in a portfolio that like a risky bet.
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