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QuantumScape (NYSE: QS), the company attempting to commercialize solid-state batteries, has witnessed a ferocious rally in its shares over the past few weeks. As an illustration, between the 01st and the 22nd of December, the stock registered a gain of over 270 percent, corresponding to a surge in QuantumScape’s market capitalization to $45 billion.
A number of factors played an important role in spurring QuantumScape’s share price to a new zenith. In late November, the company became a public entity by merging with the Special Purpose Acquisition Company (SPAC), Kensington Capital. Then, in early December, the company announced promising new findings that enhanced confidence in the viability of its battery. To wit, QuantumScape announced that its solid-state separators can charge to an 80 percent capacity in as little as 15 minutes:
“The tested cells were large-area single-layer pouch cells in the target commercial form factor with zero excess lithium on the anode and thick cathodes (>3mAh/cm2), running at rates of one-hour charge and discharge (1C charge and 1C discharge) at 30 degrees Celsius. These tests demonstrated robust performance of these single-layer pouch cells even at these high rates, resulting in retained capacity of greater than 80% after 800 cycles (demonstrating high columbic [sic] efficiency of greater than 99.97%).”
Crucially, as per the new data, QuantumScape’s batteries do not experience much degradation even at such high rates of power, having successfully retained over 80 percent capacity after 800 cycles. This translates to a Coulombic Efficiency (CE) of 99.97 percent. The company claims that its lithium-metal batteries are anode-free. What this means is that the lithium ions are extracted from the cathode and are then deposited (electroplated) on the anode current collector, forming a temporary anode during the initial charge cycle. The anode collector then slowly loses lithium during the discharge process. Bear in mind that these batteries do not utilize carbon or carbon/silicon anode. They also do not use excess lithium on the anode, boosting energy density in the process. By eliminating the side reaction between the liquid electrolyte and the carbon in the anode of conventional lithium-ion cells, QuantumScape’s product claims to provide an enhanced driving range for EVs.
With the primer out of the way, let’s examine the most recent bullish impulse. Earlier this week, QuantumScape received another boost after Reuters reported that Apple was attempting to introduce its “iCar” in the market by 2024. Even though the iPhone manufacturer currently seems to be working on a monocell battery design based on the lithium-ion or lithium-iron-phosphate (LFP) chemical reaction, investors bid up QuantumScape’s shares in the aftermath on expectations that Apple would eventually incorporate the solid-state battery tech in its EVs.
This brings us to the crux of the matter. QuantumScape is not expected to commercially launch its products until at least 2025. This extended time horizon to product delivery corresponds to outsized holding risk. While a gradual rise in the pre-revenue company’s stock price is healthy and natural, given the wide ramifications of a successful product launch, what we’ve witnessed over the past few days is naked speculation driven by momentum. As with all good things in life, momentum alone is insufficient for an organic rally. From a technical perspective, the Relative Strength Index (RSI) 14 is currently at 85.21, flashing a sell signal while the stochastics are broadly neutral. Moving Averages are, naturally, a strong buy currently given the fact that these are lagging indicators. On the fundamental front, the analysis nodes are fairly limited due to the absence of any top-line and bottom-line metric. Nonetheless, compared to the average 12-month stock price target of $28, QuantumScape shares currently boast a return potential of -78.73 percent.
Source: Koyfin
Consequently, QuantumScape investors should consider buying downside protection and use any ensuing pullbacks to lower their cost base.
