EV battery maker QuantumScape rockets 80% in last two days; Baird flags risks

QuantumScape, a mid-cap maker of solid-state rechargeable lithium metal batteries for EVs, has been soaring of late, but Baird Equity Research sees a number of risks for investors. The stock added 78% in the last two days thanks to the the announcement of a new manufacturing process for a key battery component. But Baird analyst Ben Kallo said in a note he wants «additional details on the go-to-market strategy before becoming more constructive.» Currently, Kallo's target price implies downside for the stock.

Baird does not recommend investors buy QuantumScape, despite the «milestone» announcement made by the company after the close on Tuesday, June 24, noted MarketWatch. It announced the successful integration of its advanced Cobra separator process into baseline cell production. QuantumScape wants to develop solid-state EV batteries because they promise lower costs, more per-charge range, and a better safety record, potentially making EVs more capable and cheaper than comparable gasoline-powered cars, writes Barron's. 

Investors were exuberant: In the two days after the announcement, QuantumScape rocketed 78% to $7.65 per share, a more than one-year high. In premarket trading today, June 27, the stock has given back 3.4% as of this writing.

«Significant milestones are still ahead,» Baird's Kallo pointed out, as reported by MarketWatch. He recalled that the company is still pre-revenue and that he assumes a slower production ramp.

Kallo also fingered a competitive market from multiple players. In particular, he describes the nonexclusivity deal with PowerCo, Volkswagen Group’s battery company, as both “positive and negative.” QuantumScape will grant PowerCo the license to mass produce battery cells based on QuantumScape’s technology platform.

To become more upbeat, Kallo says he needs first to see how QuantumScape plans to make money on its breakthrough technology. His target price for the stock is $6 per share, nearly 22% below current quotes. 

Wall Street largely shares Baird's caution, with the most popular rating for QuantumScape being a «hold» (four analysts), according to MarketWatch data. Two other analysts have «sell» recommendations on the stock, and only one has a «buy.» The average target price of $4.83 per share is lower than the current market price.

The AI translation of this story was reviewed by a human editor.