Quantum Scape (NYSE: QS) Amazon reported its second-quarter earnings on July 24. Once again, the solid-state battery developer didn’t generate any meaningful revenue because it hadn’t yet commercialized any of its products. Its net loss widened year-over-year to $123 million, or $0.25 per share, missing analysts’ expectations for a two-year loss.
On adjusted earnings before interest, taxes, depreciation and amortization (earnings before interest, taxes, depreciation and amortizationOn a year-over-year basis, its loss widened to $73 million from $64 million. The company confirmed its previous full-year guidance for an adjusted EBITDA loss of $250 million to $300 million, which would be slightly wider than its adjusted EBITDA loss of $249 million in 2023.
QuantumScape stock plunged after this unimpressive report, and is now trading 95% below its all-time high in December 2020. But can it recover over the next 12 months as it makes further progress toward commercializing its batteries?
What does QuantumScape do?
QuantumScape is developing solid-state batteries that generate power from solid electrolytes instead of the liquid electrolytes used in lithium-ion batteries. This difference allows them to charge faster and with higher capacities. They are also more resistant to high temperatures, less volatile, and last longer than their liquid-based counterparts.
Solid-state batteries are already used in smaller devices like pacemakers, wearables and IoT gadgets, but they haven’t been widely installed in mobile devices or electric vehicles because they’re expensive to mass-produce. QuantumScape wants to establish an early-mover advantage in this emerging market.
QuantumScape says its latest solid-state battery could give electric vehicles a range of 400 to 500 miles with a charge time of less than 15 minutes. By comparison, most lithium-ion batteries for electric vehicles have a range of around 300 miles with an average charge time of 30 minutes. That sounds like an ambitious goal, but Volkswagen I worked with the company for 12 years to develop and market their first batteries.
When will QuantumScape start making money?
QuantumScape went public through a merger with a special purpose acquisition company (SPAC) in 2020. Before going public, it claimed it could generate $14 million in revenue in 2024 as it sold its first batteries. It also claimed its top line would grow at a staggering 363% CAGR from 2024 to 2028 to $6.44 billion.
But after several Major delaysQuantumScape has abandoned those ambitious goals. The company doesn’t expect to generate any meaningful revenue this year as it ships low-volume prototype samples of its QSE-5 batteries to a handful of automakers. In 2025, the company plans to start shipping its samples in larger volumes, but analysts expect it to generate only about $5 million in revenue with an adjusted EBITDA loss of $304 million.
In 2026, analysts expect QuantumScape to post revenue of $58 million with an adjusted EBITDA loss of $299 million as it commercializes its first batteries. But even on that rosy forecast, its stock still looks expensive at about 70 times its 2026 sales — and that’s assuming it can actually ramp up production.
Whether QuantumScape can achieve this goal is debatable. It has already established itself as a leader in solid-state batteries, but it already faces stiff competition from similar startups like Blue Solutions. Toyota And New QuantumScape is also developing its own batteries. If it can’t stay ahead of its competitors over the next two years, it could be obsolete long before its business can scale.
On the other hand, QuantumScape recently entered into a new agreement with Volkswagen subsidiary PowerCo to develop and license its upcoming batteries. The company says that royalty payments from this deal will extend its “cash runway through 2028.”
Will QuantumScape stock rise again in a year?
QuantumScape’s stock is difficult to value, but Markets and Markets expects the solid-state battery market to grow at a CAGR of 41.5% from 2023 to 2030. If QuantumScape succeeds in commercializing and mass-producing its batteries, it could have a good chance of matching or exceeding the market’s growth rate in the long run. These forecasts could cap the decline at these levels as investors patiently await further developments in 2025 and 2026.
So, I wouldn’t be surprised if QuantumScape’s stock stays around its current price throughout the second half of 2024. But in the first half of 2025, its stock could rally significantly as it finally starts generating meaningful revenue from its higher-volume samples. So for now, QuantumScape will remain a speculative stock — but its recent deal with PowerCo suggests it could see multiple gains over the next 12 months if it proves its business model is sustainable.
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Leo He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Volkswagen Ag. The Motley Fool has Disclosure Policy.
Where will QuantumScape stock be in one year? Originally posted by The Motley Fool
