If you invested in QuantumScape (NYSE:QS) stock at the right time, you may have seen your account grow quickly.
However, don’t pat yourself on the back yet. The electric vehicle battery technology company could easily cough up its recent gains as a well-known automaker poses a serious threat to QuantumScape.
I’ll admit it: QuantumScape shares quickly gained value after I called the stock a “death trap.” I’m still standing by my sell-the-rips call, though.
So now, before laying out the bear case, let’s try to figure out why the market abruptly flipped bullish on QuantumScape.
QS Stock Catches a Bid, but Don’t Get Too Excited
The first factor to consider is that the Nasdaq roared ahead in May and June. This occurred even though QuantumScape published zero updates on the company’s press releases page during those two months.
Besides, stocks rarely go down in a straight line. QuantumScape reported no revenue and no income as of its most recently released quarterly Form 10-Q.
Financial traders don’t always focus on fundamentals. Consequently, there will be times when the QuantumScape share price spikes.
Those spikes could easily be head-fakes, though. Without any significant operational updates from QuantumScape, it’s difficult to justify QS stock’s sudden rally from $6 in mid-May to $9 in early July.
We’re talking about a 50% gain without any game-changing company-specific news.
Most likely, some short-sellers got squeezed out. Plus, there’s been a great deal of enthusiasm about Tesla (NASDAQ:TSLA) lately.
This probably helped to boost the prices of clean-energy stocks generally. However, Tesla’s not the only famous automaker that QuantumScape’s shareholders should be thinking about right now.
QuantumScape Has a Rival Developer
It’s frustrating to see QuantumScape dragging its feet in providing significant operational updates. Meanwhile, Toyota Motor (NYSE:TM) is cruising ahead with major ambitions to develop a solid-state EV battery.
This is no secret, actually. In June, Toyota touted its plans to advance its own solid-state batteries for battery electric vehicles.
These, hopefully, will be “good, low-cost batteries that will contribute to the spread and expansion of BEVs to provide customers with a variety of choices in batteries.”
Now, we have more information about the scope of this project. According to Keiji Kaita, president of Toyota’s research and development center for carbon neutrality (per The Guardian), the automaker seeks to “halve” the size, weight and price of solid-state EV batteries.
Kaita, The Guardian reports, claims that Toyota has “developed ways to make batteries more durable.”
Furthermore, Kaita believes that Toyota can now “make a solid-state battery with a range of 1,200km (745 miles) that could charge in 10 minutes or less.”
Toyota’s plan, reportedly, is to produce solid-state EV batteries as early as 2027. QuantumScape might push a product out earlier, but the company’s snail-like pace is frustrating.
Consider This Alternative to QS Stock
I’m not saying that anyone should invest in Toyota just because the automaker is developing a solid-state EV battery. Bear in mind, Toyota primarily is a vehicle manufacturer.
However, if I had to choose between TM stock and QS stock, I would certainly pick the former over the latter. As I’ve repeatedly emphasized, QuantumScape remains an income-negative business.
Moreover, the company still isn’t close to the product-commercialization phase. Hence, unless the circumstances change dramatically, I still can’t recommend taking a share position in QuantumScape.
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.