So far, if you want to wager on the future of solid-state electric-vehicle (EV) batteries, you have few options, and QuantumScape (NYSE:QS) is one of them. Indeed, with plenty of trading volume and press coverage, QS stock has been an obvious choice.
On May 21, I offered a hearty recommendation to folks interested in betting on QuantumScape. My advice was to be patient even though Wall Street analysts don’t expect QuantumScape to have any sales until 2024.
The QS stock price went sideways after I issued that bullish call, but some things have changed. Specifically, there’s a new price target from a Wall Street analyst — and it’s not encouraging.
On top of that, there’s likely to be some major competition in QuantumScape’s niche market. Moreover, it will be from a startup with a well-known, big-money financial backer.
A Closer Look at QS Stock
As you may recall, throughout much of 2020, QuantumScape was tradable through a blank-check company known as Kensington Capital. That company had the stock ticker symbol “KCAC.”
Kensington Capital completed its business combination with QuantumScape on Nov. 27 of that year.
Then came what I call the “hype phase” in late 2020. Amazingly, the KCAC/QS stock price catapulted from around $10 in August to a 52-week high of $132.73 in December.
I hate to be the bearer of bad news, but 2021 hasn’t been charitable to QuantumScape’s investors. As it turned out, the share price ended January at around $44, and things only got worse from there.
As of June 24, QS stock is trading at around $28 per share. I suppose that staunch contrarians might view this as a buying opportunity.
Maybe they’re right, but there’s undeniable risk involved. One Wall Street analyst in particular doesn’t seem to see much upside, unfortunately.
A Lukewarm Take
Don’t get the wrong idea. I’m not trying to imply that Wolfe Research automotive analyst Rod Lache is full-on bearish when it comes to QS stock.
Still, when Lache recently initiated coverage on QuantumScape with a hold rating, that suggests a rather lukewarm take on the company’s prospects.
Furthermore, Lache assigned a price target of $25 on the stock. If that holds true, then the share price will basically go nowhere or even lose value over the next 12 months.
QuantumScape doesn’t offer a dividend to investors, so the company’s investors will definitely want to see some price appreciation in the stock.
Perhaps Lache is disappointed because during the first quarter of 2021, QuantumScape reported no revenue whatsoever.
Now, out of six analysts on Wall Street covering the company, only two of them rate QuantumScape shares as a buy.
Also, the price targets on QS stock are all over the map, ranging from as low as $25 to as high as $70.
Here Comes Another SPAC
My point is that it’s tough to get a reading on what Wall Street really thinks of QuantumScape.
It certainly isn’t helping that the company is set to have a formidable competitor. It’s another startup that has the backing of Ford (NYSE:F).
Just as QS stock was birthed from a special purpose acquisition company (SPAC) merger, rival solid-state battery maker Solid Power plans to go public through a merger with a SPAC known as Decarbonization Plus Acquisition III (NASDAQ:DCRC).
The combined company will have an estimated value of around $1.2 billion. And QuantumScape simply doesn’t have backers as big as Ford.
Besides, the hype phase has already passed for QuantumScape. It’s conceivable that some investors might dump their QS stock shares in favor of a new shiny object, so to speak.
Not only that, but Solid Power expects to commence the pilot production of its full-scale 100 Ah (ampere hours) batteries next year. Meanwhile, QuantumScape hopes to start the pilot production of its batteries in around three years.
The Bottom Line
I’m not necessarily bearish on QS stock. There’s room for more than one player in the solid-state battery niche.
With the excitement phase already having passed and a strong competitor entering into the fray, however, investors might choose to avoid QuantumScape for the time being.
On the date of publication, David Moadel 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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.