Should dip-buyers consider investing in electric vehicle (EV) battery technology company QuantumScape (NYSE:QS) now? I hate to be the bearer of bad news, but the risk-to-reward profile isn’t ideal for QS stock in 2023. QuantumScape’s financials certainly aren’t favorable. In addition, it’s taking a very long time for QuantumScape to develop its multi-layered battery cell product.
QuantumScape is truly a hero-or-zero type of startup. The company is working tirelessly to develop a “forever battery” that would, at least in theory, change the EV landscape of the 2020s.
Yet, QuantumScape is testing the patience and resolve of its loyal shareholders. They can only tolerate so much capital loss. And they’re wondering how much longer it will take QuantumScape to get its battery technology to market.
QS Stock Slides Toward Penny Stock Territory
Believe it or not, QuantumScape shares have lost half their value since mid-February. QS could actually become a penny stock soon, as it was recently seen near the crucial $5 level. Thus, it’s fair to conclude that QuantumScape’s hype phase is in the rearview mirror now, and the company’s investors must now come to terms with the harsh reality of the situation.
The operational updates on QuantumScape’s press releases page have been few and far between. A lot of time has passed — five months, actually — since QuantumScape shipped its first 24-layer prototype battery cells to automotive manufacturers. Time flies, but QuantumScape’s progress has been frustratingly slow.
QuantumScape did issue a shareholder letter in late April, but QS stock only continued to slide after that. Perhaps, that’s because QuantumScape’s operational update wasn’t particularly encouraging. As QuantumScape transitions “from prototype to commercial product,” the company admits that “still has “work to do to improve reliability.” Meanwhile, QuantumScape’s investors haven’t been provided with a specific timeline for this transition.
QuantumScape Is a Money Pit
Some folks might think that it’s fine for QuantumScape to take its sweet time as the company develops its multi-layer battery cell technology. Yet, it costs a great deal of money to run a business like this.
Not long ago, QuantumScape acknowledged that it “had not derived revenue from its principal business activities” as of March 31. The company also conceded that its planned “principal operations have not yet commenced.”
At the same time, QuantumScape has been a money pit. The company’s operating expenses grew to $109.978 million in 2023’s first quarter, from $90.657 million in the year-earlier quarter.
That’s not the only startling statistic. From the year-ago quarter to Q1 2023, QuantumScape’s net earnings loss expanded from $90.353 million to $104.631 million. Furthermore, QuantumScape’s capital position weakened during that time. Specifically, the company’s total cash, cash equivalents and restricted cash declined from $300.535 million in the three months ended March 31, to $258.733 million in the three months ended March 31, 2023.
Don’t Even Think About Buying QS Stock
If you’re interested in QuantumScape’s expected time to full product commercialization, the company hasn’t provided much clarity on that topic. That’s a major problem, since QuantumScape hasn’t stopped spending money on product research and development.
The point is, QuantumScape is a promising company that could bring a game-changing product to the market someday. Yet, it doesn’t make sense to wait around for that “someday” to happen. So, unless the circumstances change, QS stock is still not a buy in 2023.
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.