Electric-Battery Start-Up QuantumScape Experiences Stock Surge

Shares of electric-battery start-up QuantumScape (ticker: QS) saw a significant increase on Thursday, following the release of their second-quarter earnings report. Although the surge in stock can't be directly attributed to their financial performance.

For the second quarter, QuantumScape reported a loss of 26 cents per share with no sales. As a company that is still pre-sales, QuantumScape is focused on developing solid-state EV batteries. Solid-state batteries, characterized by a solid electrolyte, aim to enhance electric current flow, promising advantages such as longer range, lower costs, improved safety, and faster charging. These advancements are certainly positive, but commercially proving the technology remains pending.

While Wall Street projected a loss of 20 cents per share for the quarter, the actual loss was wider than anticipated. However, this did not hinder the stock from surging by 25%. In comparison, the S&P 500 and Nasdaq Composite were both up around 0.5% and 1.1% respectively.

The reason for the stock surge lies elsewhere. In its second-quarter update, QuantumScape revealed that it was collaborating with a prospective launch customer in the automotive sector for its first commercial product. This indicates upcoming sales. Analysts currently project that the company will start generating revenue in the first quarter of 2025.

In a report, Truist analyst Jordan Levy commended QuantumScape for appearing to be on track with the timelines previously communicated, if not slightly ahead. He acknowledged that the company was "gaining momentum" but maintained a Hold rating on their shares due to a "balanced near-term risk/reward profile." Levy's target price for the stock is $10 per share, while QuantumScape stock is currently trading at over $12 per share.

In addition to advancing electric vehicle commercialization, QuantumScape noted that it was also working on applications related to stationary energy storage. Pairing battery storage with solar and wind power can improve the reliability of these renewable energy sources. Tesla (TSLA) is already selling utility-scale battery storage products.

Although QuantumScape has identified storage as another market opportunity, the surge in shares on Thursday was primarily driven by the company's progress in the EV sector.

So far this year, QuantumScape stock has risen by approximately 107%. However, the shares are still below the all-time high of nearly $133 per share reached in December 2020.