Bullish investors on QuantumScape (NYSE:QS) know how strong the company’s potential is in the solid-state lithium batteries space. Most fans, staying as positive as they can, believe the company is nearing commercialization. In 2024, QS will focus on QSE-5 cells, undergoing customer prototype testing, particularly with automotive original equipment manufacturers (OEMs). Initial results from A0 prototype cells showed superior performance, though QS stock remains a speculative, long-term investment.
Analysts anticipate revenue growth, potentially reaching $146.6 million in FY2026 and $1.38 billion in FY2028. However, investors in QuantumScape should note an upcoming event that may sway stock forecasts. Buying now is risky without clarity, at least in my view.
Upcoming Earnings Report
QuantumScape consistently missed Wall Street’s forecasts in recent quarters, including its latest report where its earnings per share (EPS) fell short by 4 cents. That matters, as cash bleed could inhibit the company’s attempts to scale up production when the time comes.
Last year, QS stock remained stagnant due to its consistent unprofitability and failure to meet Wall Street’s expectations. Investors want companies that are profitable, and QS stock has been on the outside looking in. Until more progress is made, or the company updates its outlook, I think future earnings reports are likely to show more of the same.
The Flaw
QuantumScape’s recent surge was fueled by its battery’s durability. However, it fails to tackle key concerns. Competition and profitability uncertainties warrant selling.
A basic understanding of electric vehicle (EV) challenges reveals three main hurdles: range anxiety, slow charging and high prices, compounded by charger scarcity.
Recent tests conducted by Volkswagen (OTCMKTS:VWAGY) on QuantumScape’s batteries offer no clear evidence of addressing EV challenges. Volkswagen’s EV battery head mentioned potential benefits, but indicated QuantumScape has not yet achieved key benchmarks. Despite claims of reaching 400-500 miles in under 15 minutes, QuantumScape’s success remains uncertain.
In a December investor note, HSBC projected that QS wouldn’t generate significant revenue until 2027 and positive cash flow until 2031. The bank anticipated increased cash burn and the need for additional funding by late 2025. The company’s batteries didn’t provide solutions to EV challenges and appeared behind two competitors.
Despite this, QS stock maintains a high market capitalization of $3.76 billion. I’m not sure if such a valuation is sustainable right now.
Waiting on QS Stock May Be a Waste of Time
QuantumScape pinned high hopes on its upcoming earnings, which will be posted today, aiming for signs of a turnaround. CEO Jagdeep Singh faced mounting pressure to launch the Flex Frame battery cell for mass production. Despite uncertainties, some, like InvestorPlace’s Faisal Humayan, remained optimistic about test results.
Yet, caution is warranted due to the lack of revenue and hefty research expenses, with an annual burn rate of $350 million. While holding over $1 billion in cash reserves, QuantumScape must prove its solid-state battery’s viability to stay competitive. I’m just not sure investors will wait around to see results, given the current impatience of the market.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.