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quantum scape (NYSE:QS)The company, which is a developer of all-solid-state batteries, merged with a special acquisition purpose company (SPAC) and went public on November 27, 2020. The company’s stock opened at $24.80 and rose to an all-time high of $131.67 on December 22nd.
But now, QuantumScape’s stock is trading at just $7. If you invested $2,000 in the stock on day one, it would have briefly risen to more than $10,600 before deflating to about $560 today. Let’s take a look at why bulls fell in love with QuantumScape in the first place, why they backed out, and whether the stock could revisit all-time highs.
Why did QuantumScape stock price soar in 2020?
QuantumScape is developing all-solid-state batteries that utilize solid electrolytes instead of the volatile liquid electrolytes used in lithium-ion batteries. This difference makes solid-state batteries more resistant to high temperatures and less prone to fires.
Solid-state batteries are already widely used in pacemakers, wearable devices, and small radio frequency identification (RFID) products, but their low durability prevents them from replacing lithium-ion batteries in smartphones and electric vehicles (EVs). did. It is less dense and more expensive.
QuantumScape wants to fill that gap by developing a new generation of solid-state batteries that can replace lithium-ion batteries in EVs. The company is already developing a solid-state battery that could revolutionize the EV market with a range of 650km and a charging time of just 15 minutes.The largest investor is a major automobile company. Volkswagenstarted working with battery manufacturers over 10 years ago.
QuantumScape’s plans seem promising, but they are not yet in production. In a pre-merger presentation, the company said it could begin commercializing its products in 2024, with revenue likely to grow from $14 million in 2024 to $6.44 billion in 2028, at a compound annual growth rate of 363%. He claimed that there was. It also declared adjusted earnings before interest. Taxes, depreciation, and amortization (EBITDA) will become positive by 2027.
Bulls flocked to these bullish estimates, and the stock reached a market cap of $47.8 billion at the end of 2020, even though it has yet to turn a profit. A buying frenzy in growth and meme stocks amplified the rally.
Why did QuantumScape’s stock price decline over the next three years?
Since then, QuantumScape’s stock price has plummeted 95% for three reasons. First, rising interest rates drove investors away from pre-speculative profit-making companies. Second, the broader EV market has cooled, clipping the wings of many high-flying EV stocks.
In the end, QuantumScape lost more money than originally expected. Returning to its pre-merger presentation, the company expected to post an adjusted EBITDA loss of $102 million in 2022 and a loss of $114 million in 2023. But in reality, the adjusted EBITDA loss for 2022 was $249 million, and analysts expect it to be even wider. A loss of $280 million in 2023.
In addition, free cash flow (FCF) was expected to be negative by $137 million in 2022 and $169 million in 2023, but in reality, FCF in 2022 was negative by $377 million. It’s negative, with analysts expecting FCF to be negative by $314 million in 2023.
Could QuantumScape’s stock price hit all-time highs again?
On the bright side, QuantumScape still ended the latest quarter with $1.13 billion in cash, cash equivalents, and marketable securities, while its low debt-to-equity ratio of 0.1 gives it plenty of room to raise new cash. there is. The company also said it plans to begin shipping the first small-volume samples in 2024 and large-volume samples in 2025.
For now, analysts expect QuantumScape’s revenue to only reach $2 million in 2024 and $15 million in 2025. Based on its current enterprise value of $2.54 billion, the company’s stock price still looks ridiculously expensive at 169 times 2025 sales. However, if it succeeds in increasing production over the next few years, it could grow to a high valuation.
That said, I don’t think QuantumScape will hit all-time highs anytime soon. The company’s rally in late 2020 was driven primarily by a stimulus-induced meme stock buying frenzy, rather than the intrinsic value of its business. It’s still a speculative stock at these levels, but if the bears are proven wrong, it could become a multibagger in the coming decades.
Should you invest $1,000 in QuantumScape right now?
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Leo Sun has no position in any stocks mentioned. The Motley Fool has a position in and recommends Volkswagen. The Motley Fool has a disclosure policy.
“If I Invested $2,000 in QuantumScape in 2020, How Much Would I Get Today?” was originally published by The Motley Fool
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