Electric vehicle (EV) battery technology company QuantumScape (NYSE:QS) recently gained a high price target from a notable analyst firm. However, I don’t recommend chasing QS stock. Pick your buy price and be patient, as QuantumScape isn’t a risk-free business by any means.
QuantumScape’s solid-state battery cell technology could alter the landscape for the EV battery industry. That’s exciting to consider, but you can still apply the tried-and-true principle of buy low and sell higher. So, let’s weigh the risks and potential rewards of investing in QuantumScape.
An Analyst Firm Envisions $10 for QS Stock
Not long ago, according to a report from Seeking Alpha, analysts with Evercore ISI initiated their coverage of QS stock with an “outperform” rating and a $10 price target. This implies considerable upside from the current QuantumScape share price.
It’s a bold call, but it’s not without merit. Evercore ISI analyst Chris McNally highlighted QuantumScape’s unique EV battery-cell technology. Impressively, QuantumScape’s cells “allow for significantly higher energy density that could be +50 to 100% greater than” today’s conventional lithium-ion EV batteries.
Furthermore, McNally reportedly suggested that, in the long run, having more energy density per cell “allows for more range per weight or size.” Additionally, it “allows for greater engineering flexibility and reduced vehicle cost via lightweighting.” McNally further clarified that the “reduction in manufacturing cost” would be attributable to the “removal of the graphite anode.”
Don’t Expect Rapid Progress From QuantumScape
In other words, Evercore ISI’s analysts are so bullish on QS stock because QuantumScape’s battery cells have notable advantages. However, this doesn’t necessarily mean QuantumScape can parlay these advantages into robust revenue and profits in the near future.
Over the past year, I’ve been carefully reading through all of QuantumScape’s press releases. I still haven’t detected a specific timetable for QuantumScape to fully commercialize its EV battery cell technology.
What I have detected is that QuantumScape’s management won’t hesitate to print and sell tens of millions of QS stock shares. Moreover, as I learned from InvestorPlace contributor Thomas Niel, mass production of solid-state batteries for EVs may be around a decade away from happening.
Meanwhile, many of QuantumScape’s might lose patience and dump their shares out of frustration. Also, it shouldn’t be too surprising if QuantumScape needs to raise more funds to develop and eventually commercialize its battery-cell technology. And if QuantumScape does print and sell more shares, the value of the current shares could get diluted.
Here’s the Best Buy Price for QS Stock
QuantumScape is an industry pioneer, but being a pioneer involves great risk. I appreciate the company’s dedication to pushing the boundaries of EV battery-cell technology, but don’t assume that QuantumScape will reap in robust revenue and profits anytime soon.
Most of all, be patient and don’t be a price chaser. It could be a costly mistake to buy shares too soon. Therefore, even if you think that QS stock will reach $10, don’t buy it unless it pulls back to $5. That way, you can de-risk your investment by giving it a greater margin of safety.
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.