Is QuantumScape Stock a Bargain or a Trap at Its Current Price?

Stock Market

No one can guarantee that it will be easy to make money as an investor of electric vehicle (EV) battery manufacturer QuantumScape (NYSE:QS). There will be bumps along the road, no doubt. Yet, there’s room for significant upside eventually, as QuantumScape’s relentless drive to innovate will drive the future growth of QS stock.

A lot has changed during the past decade. Nowadays, there are plenty of EV stocks to choose from. Some investors will just pick an EV manufacturer and hope that it outperforms the numerous competitors in that field.

There’s another way to gain exposure to the EV revolution, though. Remember, these vehicles will need batteries. Moreover, whichever company makes the products that dominate the future of EV battery technology, should deliver excellent returns to its shareholders. Will QuantumScape be that company? Only time will tell, but some signs point to QuantumScape as a potential winner in the long run.

What’s Happening With QS Stock?

Some critics will call QS stock a trap because it’s down significantly from its peak price. Granted, the QuantumScape share price recently declined to $7 or $8 and is far from its 52-week high of $22.21.

Does this mean QuantumScape’s investors are trapped? Not necessarily, unless you consider every unprofitable company a trap. If you’re going to invest in QuantumScape, you’ll have to forgive the company for not currently having revenue or earnings to brag about.

QuantumScape isn’t a bankrupt business, however. The company is implementing cost-saving measures this year, including a “reduction in services, materials, [and] utilities … as well as rebalancing personnel.” Consequently, QuantumScape’s “cash runway now extends into the second half of 2025.” In other words, the company is in a better capital position than some people might have expected.

Focus More on QuantumScape’s Technology Than the Company’s Financials

Still, the main focal point shouldn’t be QuantumScape’s current financial status. Investors will need to be patient and keep their eyes on the prize: QuantumScape’s innovations in solid-state EV battery technology.

QuantumScape had a milestone moment last year when the company shipped its 24-layer lithium battery cell prototypes to automotive original equipment manufacturers (OEMs). Furthermore, QuantumScape released data indicating that the company’s battery cells “completed 400 consecutive 15-minute fast-charging (4C) cycles from 10% to 80% of the cell’s capacity while retaining well above 80% of the initial energy,” according to Green Car Congress.

The company isn’t satisfied yet, however. As a goal for this year, QuantumScape wants to improve the quality and consistency of its materials and processes. In particular, QuantumScape plans to achieve “increased precision through automation and process control, quality of material inputs, and particle reduction across our process flow.” Clearly, QuantumScape will remain ambitious and goal-driven throughout 2023.

So, Is QuantumScape Stock a Bargain or a Trap?

Some financial traders might not consider a share position in QuantumScape because the company isn’t currently profitable. Others may think it’s a deal-breaker that QuantumScape is taking a while to develop its EV battery technology.

None of this makes QS stock a trap, though. If you believe that QuantumScape can achieve its stated objectives, then you should consider the company’s shares to be a terrific bargain. With that in mind, it’s a great time for patient, risk-tolerant investors to seriously consider a share position in QuantumScape.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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