Investment Alert: Buy QuantumScape (QS) Under $10
Disclaimer: Investment Alerts have a medium to long-term time horizon. These do not constitute financial advice and you should contact a financial advisor before deciding whether it is appropriate for your individual circumstances.
When a stock is up 50% in a few weeks, it’s usually wise not to chase it. So let’s stick with that rule while keeping an eagle eye out for QuantumScape to pull back in price. This stock is well worth keeping your eye on and placing on your watchlist following news from Toyota recently that might make the case for QS compelling.
Let’s dive in.
- There are now reasons to get excited about QS, as Toyota announced a “technological breakthrough” regarding solid-state batteries that will allow them to last longer.
- Previous concerns about the commercial viability of solid state batteries are no longer in question, creating a tailwind for QuantumScape.
- The stock is up 50% in such a short period, so it’s risky to chase the price but a pullback to moving averages would offer a prime opportunity to ride a bullish trend.
The Bullish Technical Case
Let’s start with what QuantumScape actually does; it’s a producer of solid state batteries that are believed to be superior to conventional lithium ion batteries, which are currently used in electric vehicles.
At one point investors were enamored by the prospects for QS. With massive regulatory tailwinds supporting electric vehicle manufacturing, QuantumScape could become integral to the EV ecosystem, or so the bullish thesis went.
As the curtains were drawn on the year 2020, QS rallied all the way to $100 and beyond. But the fairytale didn’t last long. In the seeming blink of an eye in early 2022, the share price did a U-turn, and tumbled for years all the way to the single digits.
So why now is there any reason to get excited by QS?
Massive Toyota Announcement
In a stunning news report, Toyota announced a “technological breakthrough” regarding solid-state batteries that will allow them to last longer. Commercialization is forecast in 2028 or perhaps a year sooner.
Then came the news from QuantumScape that it had signed agreements with 6 auto OEMs. The deals excited investors, not least because solid-state batteries are projected to charge significantly faster than today’s alternatives. Think of the difference between charging an iPhone with an old USB cable versus a lightning connector; the speed difference has the potential to change the consumer demand curve in favor of EVs manufactured with solid state batteries.
If we look back at how QS has traded, it’s clear that pessimism among investors that solid state batteries could be commercialized was widespread. And they punished the stock to the tune of over 90% as a result. What the Toyota news has done is vindicated the thesis that QuantumScape could be a viable and highly successful company after all.
With QuantumScape shares up 50% in such a short period, chasing the price is a risky gambit. But a pullback in price or a little time to allow the moving averages rise to support the share price would be welcome before starting a position.
The reality is a stock can move a lot higher for a lot longer than can be fathomed. And it’s quite possible that QuantumScape is just starting a big move. Nevertheless, we’ll hang tight for now and watch and wait for an entry under $10 per share to signal the all clear.