QuantumScape (NYSE: QS) stock price has remained in a consolidation phase in the past few weeks as investors assess the company’s prospects. The stock was trading at $7.22 on Thursday, a few points below this week’s high of $8. It has plunged by almost 50% from its highest point in 2023 and 94% from its all-time high, giving it a market cap of over $3.75 billion.
Strong balance sheet but risks remainQuantumScape is a company researching and building solid-state batteries (SSB), which it hopes will help during the transition to electric vehicles. The vision is that of batteries that can charge faster, are lighter, and have a longer range.
Most analysts believe that these batteries are the future of the EV industry, which is going through major headwinds today. For one, they will help to deal with range activity, which continues to be a limiting factor in EV adoption.
QuantumScape is yet to start commercialising its batteries, meaning that it is a cash incinerator for now. The most recent results revealed that the company spent $13.8 million in the fourth quarter and $84.5 million in 2023 in capital expenditure. Its operating expenses stood at $479 million during the year.
Fortunately, QuantumScape is still flush with cash as it has over $1.2 billion in cash and short-term investments. It also expects to have an EBITDA loss of about $300 million and the management expects the current funds to run it through 2026. Therefore, if a new cash call comes, it will likely happen in 2025.
QuantumScape has made a lot of progress in its battery technology. For example, its battery managed to move to over 1,000 cycles with a 95% retention. This is important because it means that the battery can last for a long time.
However, the challenge is that there are signs that demand for electric vehicles is waning around the world. Also, the cost of manufacturing these batteries is quite enormous. Most importantly, this is basically a commodity company, and competition from SMIC and Toyota will be a factor.
As I wrote last year, Toyota has made a solid-state battery breakthrough and it expects to start manufacturing in either 2026 or 2027.
QuantumScape stock price forecast
Turning to the daily chart, we see that the QS share price has been in a tight range in the past few weeks. A close inspection shows that it has formed what looks like a head and shoulders pattern. In price action analysis, this is one of the most bearish signs. The price is a few points above the neckline of this pattern.
Therefore, I suspect that the shares will likely resume the downward trend in the coming days. If this happens, the next point to watch will be last year’s low of $5, which is about 31% below the current level.
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