Insights

Why QuantumScape Stock Lost 25% in April

What happened
Even with the S&P 500 down nearly 9% in April, some sectors stood out as having a notably worse month. Technology and growth stocks were particularly hard hit. Solid-state battery technology company QuantumScape (NYSE: QS) is among those, and is still just speculative, without a commercial product. That led to shares outpacing the broader market declines, plunging 25.3% for the month of April, according to data provided by S&P Global Market Intelligence.
So what
After QuantumScape began trading publicly in November 2020, investors were so excited about the potential of its solid-state battery technology for the electric vehicle (EV) industry that shares soared more than 400%. That valued the company with a market cap of about $45 billion.
This was for a company still in research mode that didn’t even have a proven technology for its product. Investors knew, and still should know, that QuantumScape doesn’t plan to begin production of its battery cells until 2024. So when the overall market is rotating away from growth and technology, QuantumScape stock is a prime candidate to get hit. But for those who knew this would be a very long-term story, there has been some recent good news.
Image source: Getty Images.

Now what
QuantumScape reported its first-quarter update on April 26, 2022, and it told investors it remains on track with its technology development. When the company first went public, it revealed successful data with single-layer cells for solid-state batteries. The technology has the potential to improve safety, efficiency, and performance compared to existing EV battery technologies. 
Since then, the company has shown its battery cells can successfully retain energy through enough 15-minute fast-charging cycles for an EV rated with a battery range of 400 miles to get 160,000 total miles of driving. Additionally, it has produced results showing the technology can successfully scale to the multilayer cells needed for commercialization.

As the company continues to work on developing a commercially viable product, it has maintained its guidance for a midpoint of $350 million in capital expenditures this year, while it expects to exit 2022 with $800 million in liquidity. 
As QuantumScape progresses on its business plan, the landscape has also moved to potentially add tailwinds down the road. The bipartisan infrastructure package that was passed last year included billions to help EV development in the U.S. This week, the Biden administration laid out specific plans to invest $3.1 billion specifically to aid domestic manufacturing of batteries. 

These grants are intended to help the industry in general, and there hasn’t been any specific support for QuantumScape announced from the spending. But it should benefit the sector, and potentially QuantumScape, in the long run. 
The market shied away from growth and tech stocks last month. Speculative names that aren’t yet bringing in any revenue were particularly hard hit. But for long-term investors wanting exposure to a potentially disruptive EV technology, the April decline might be a good opportunity to get a lower price for QuantumScape shares.
Howard Smith has positions in QuantumScape Corporation. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. –

What happened

Even with the S&P 500 down nearly 9% in April, some sectors stood out as having a notably worse month. Technology and growth stocks were particularly hard hit. Solid-state battery technology company QuantumScape (NYSE: QS) is among those, and is still just speculative, without a commercial product. That led to shares outpacing the broader market declines, plunging 25.3% for the month of April, according to data provided by S&P Global Market Intelligence.

So what

After QuantumScape began trading publicly in November 2020, investors were so excited about the potential of its solid-state battery technology for the electric vehicle (EV) industry that shares soared more than 400%. That valued the company with a market cap of about $45 billion.

This was for a company still in research mode that didn’t even have a proven technology for its product. Investors knew, and still should know, that QuantumScape doesn’t plan to begin production of its battery cells until 2024. So when the overall market is rotating away from growth and technology, QuantumScape stock is a prime candidate to get hit. But for those who knew this would be a very long-term story, there has been some recent good news.

Image source: Getty Images.

Now what

QuantumScape reported its first-quarter update on April 26, 2022, and it told investors it remains on track with its technology development. When the company first went public, it revealed successful data with single-layer cells for solid-state batteries. The technology has the potential to improve safety, efficiency, and performance compared to existing EV battery technologies

Since then, the company has shown its battery cells can successfully retain energy through enough 15-minute fast-charging cycles for an EV rated with a battery range of 400 miles to get 160,000 total miles of driving. Additionally, it has produced results showing the technology can successfully scale to the multilayer cells needed for commercialization.

As the company continues to work on developing a commercially viable product, it has maintained its guidance for a midpoint of $350 million in capital expenditures this year, while it expects to exit 2022 with $800 million in liquidity. 

As QuantumScape progresses on its business plan, the landscape has also moved to potentially add tailwinds down the road. The bipartisan infrastructure package that was passed last year included billions to help EV development in the U.S. This week, the Biden administration laid out specific plans to invest $3.1 billion specifically to aid domestic manufacturing of batteries. 

These grants are intended to help the industry in general, and there hasn’t been any specific support for QuantumScape announced from the spending. But it should benefit the sector, and potentially QuantumScape, in the long run. 

The market shied away from growth and tech stocks last month. Speculative names that aren’t yet bringing in any revenue were particularly hard hit. But for long-term investors wanting exposure to a potentially disruptive EV technology, the April decline might be a good opportunity to get a lower price for QuantumScape shares.

Howard Smith has positions in QuantumScape Corporation. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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