Why QuantumScape Stock Collapsed 31% in July

Shares of QuantumScape (NASDAQ: QS) fell 31% in July, according to data from S&P Global Market Intelligence. The battery technology outfit had a rough month after reporting its Q2 earnings, amid a decline in stock prices across high-risk areas of the stock market.

After a brief rise at the start of August, QuantumScape now trades at $6 per share and is down 95% from its highs. Here's why it was falling again in July.

Breakthroughs in battery technology

After going public in 2020, QuantumScape stock rose during the COVID-19 electric vehicle (EV) bubble, before slowly falling back to earth. The company has been working for years on a solid-state battery technology for EVs, which promises better performance and less fire safety risks compared to current liquid lithium-ion systems.

Still, in 2026, it had failed to make enough progress with its batteries to reach full production. The company has never generated a lick of revenue and is burning hundreds of millions of dollars in free cash flow each year.

Now, the company has begun to give up its hopes of manufacturing batteries at scale, instead licensing these systems to other manufacturers, such as automakers. This did not go over well with Wall Street and is a reason the stock fell in July.

In July, QuantumScape reported second-quarter earnings, but they are not very relevant to the business today, as it has no products to sell. Investors need to look closely at the company's product development to see whether it is meeting its timeline for implementing this technology in EVs at scale. Right now, management believes it will be ready by 2029.

Image source: Getty Images.

Should you buy the dip on QuantumScape stock?

QuantumScape has $860 million in cash on its balance sheet. It is currently burning just under $300 million in cash per year, giving it around three years of product development before it needs to raise more money.

The stock now trades at a market cap of $3.7 billion, down significantly from previous highs but still at a premium for a company that has never generated revenue. It has proven much more difficult to develop these battery innovations than previously assumed, and Wall Street is beginning to get impatient with the stock.

QuantumScape believes it is on a better track by not manufacturing its own batteries and by partnering with companies across the automotive sector, like Honda, but it still needs a working battery if this business is going to have a whiff of viability. Don't buy the dip on QuantumScape stock.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.