QuantumScape (NYSE: QS), a developer of solid-state lithium metal batteries, posted its fourth-quarter report on Feb. 12. It didn't generate any revenue since it hasn't commercialized any of its batteries yet. Its net loss widened year over year, from $110 million to $115 million, or $0.22 per share, but still beat the consensus forecast by $0.01.
For the full year, QuantumScape's net loss widened from $430 million to $475 million. That situation might seem grim for a company with an enterprise value (EV) of $2.2 billion, but it also provided clearer updates for its commercialization efforts.
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Should you buy QuantumScape's stock right now before it finally ships its first commercial batteries?
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Why could QuantumScape disrupt the lithium-ion battery market?
Traditional lithium-ion batteries use liquid electrolytes to generate electricity. Solid-state batteries use solid electrolytes, which are denser, more resistant to high temperatures, and charge more quickly than liquid electrolytes. However, they're also more expensive, more technologically complex, and tougher to mass produce.
Solid-state batteries have only been mass produced for smaller devices -- like wearables and pacemakers -- so far, but companies like QuantumScape are trying to ramp up their production for electric vehicles (EVs). Volkswagen has been co-developing those batteries with QuantumScape for more than a decade, and the German automaker established a new group, PowerCo, to road test its first prototypes in 2022.
QuantumScape's QSE-5 batteries have an energy density of over 800 watt hours per liter (Wh/L) and can be rapidly charged from 10% to 80% in less than 15 minutes on a Level 3 charger. Traditional lithium-ion batteries have an average density of 300-700 Wh/L and generally require 20 minutes to an hour to be charged to 80% on a Level 3 charger.
Therefore, solid-state batteries could eventually render lithium-ion batteries obsolete, but it faces plenty of competitors in this nascent market. Big automakers like Toyota, Hyundai, and Nio, along with smaller start-ups like Blue Solutions, are all trying to mass produce and commercialize their batteries before QuantumScape.
When will QuantumScape commercialize its first batteries?
QuantumScape previously aimed to commercialize its first batteries in 2024. It started to ship its first QSE-5 samples to select automakers in the second half of 2024, but it's still a long way from mass producing those batteries.
In 2025, QuantumScape plans to transition from its current Raptor separator process to the more advanced Cobra separator process. It expects that upgrade to boost its cell reliability and production yields. It will use that process to produce the QSE-5's more mature B1 samples, which will be shipped to more automakers throughout the year.
After it fully transitions to the Cobra process and ramps up its shipments of B1 samples, the company plans to launch its first batteries for its first "prospective customer" in 2026. It didn't name that customer, but there's a pretty good chance it's Volkswagen.
QuantumScape also doesn't plan to mass produce all of its own batteries for the foreseeable future. Instead, it wants to pursue an asset-light model of licensing its designs to other automakers. It's already licensing its designs to PowerCo, and CEO Siva Sivaram said it was in "active discussions with true automotive OEMs" during its latest conference call. That strategy would presumably keep the company's costs under control as it develops newer batteries.
If that happens, analysts expect QuantumScape to generate $4.28 billion in revenue, with a net loss of $439 million in 2026. So with an enterprise value of $2.2 billion, it actually looks cheap at 0.5 times next year's sales.
But it's also increased its share count by nearly 50% since its public debut in November 2020 and will likely keep diluting its investors with more secondary offerings and high stock-based compensation expenses. Its insiders were also net sellers over the past 12 months, and that chilly sentiment suggests its stock won't skyrocket back toward its record highs anytime soon.
Is it the right time to buy QuantumScape's stock?
QuantumScape might soar higher in the future but is still a highly speculative stock. I'd consider nibbling on the stock at these levels but wouldn't accumulate more shares until the company shows more progress toward commercializing its batteries.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
