QuantumScape (NYSE: QS) stock price jumped by more than 12% on Monday as electric vehicle shares jumped. The stock rose to a high of $6.78, which was about 18% above the lowest level this month. Despite the rally, the shares have dropped by over 38% since the company went public and by over 94% from the highest point on record.
Is QS a good investment?
QuantumScape is a pre-revenue company that is developing solid-state batteries that it hopes will have a major role in mobility and consumer electronics. In the past few years, the company has made major investments and advances in the industry.
Most importantly, the company is now carrying out tests of its prototype as it works towards mass production. Early reports show that the company’s battery technology is working. The company’s goal for this year is to facilitate moving from technology demonstration to commercial product.
As a pre-revenue company, investors usually focus on how the company is using its existing resources. The most recent results showed that the company’s operating expenses jumped to $110 million while the net loss came in at $105 million. The company hopes that its operating expenses will be between $225 million and $275 million.
QuantumScape has over $1 billion in liquidity and it expects that these funds will give it a runway to extend beyond 2025. Like many companies in its stage, the company has diluted its investors several times. As a result, the number of outstanding shares rose from 409.51 million in December 2021 to over 435 million now.
It is still too early to recommend investing in QuantumScape despite its remarkable progress. I suspect that the company will continue making losses even when it starts mass production of its batteries. Analysts believe that it will become profitable in 2029. By then, QuantumScape will need to raise additional capital several times.
QuantumScape stock price forecast
QS chart by TradingView
The daily chart shows that the QS share price has been in a strong bearish trend in the past few months. It has moved below the important support level at $11.20, the lowest level on October 29 2020. It has crashed below the 50-day and 100-day exponential moving averages.
The stock has formed what looks like a double-bottom pattern at $5.10. This pattern is usually a bullish sign. Therefore, we could see the stock rebound to the resistance at $11.20 in the near term. In the long term, the shares will likely continue falling amid dilution risks.
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