Should You Buy QuantumScape While It's Below $9?

It has been a tough backdrop for electric vehicles and related stocks. One stock that has had an up-and-down year is battery manufacturer QuantumScape (NASDAQ: QS). The company had a pretty solid year last year, making strides in its battery technology.

The stock reached $19 per share last October, but today it is 63% below its 52-week high. With shares trading under $9 a share, is QuantumScape stock a buy? Let's dive into the business and its progress to find out.

QuantumScape is making crucial progress on its battery technology

Last year was a productive one for QuantumScape, as the company made significant progress with its battery technology. One of its top achievements was the integration of what it calls the Cobra separator process into baseline cell production in the second quarter. This manufacturing process achieved a 25x improvement in heat-treatment speed (compared to its previous Raptor process) and requires significantly less floor space, bringing it one step closer to mass-producing its batteries.

In the third quarter, the company began shipping QSE-5 B1 cell samples to automotive customers, which feature separators produced using its Cobra process. This cell demonstrated an energy density of 844 Wh/L and 301 Wh/kg, which means its battery is smaller and lighter than current technology. In addition, it can fast-charge from 10% to 80% in under 15 minutes, which addresses one of the key disadvantages of electric vehicles.

Image source: Getty Images.

The company also expanded its collaboration with PowerCo, which is Volkswagen's battery arm. As part of this, there is a non-exclusive license to mass-produce battery cells up to 40 GWh per year, expandable to 80 GWh per year. It also entered a joint development agreement with Murata Manufacturing and Corning to produce ceramic separators at high volume for its solid-state batteries. These companies help QuantumScape build up its global supplier ecosystem as it prepares to produce batteries at scale.

What's next for QuantumScape?

This year, QuantumScape will begin field testing of its QSE-B1 sample cells in vehicles, as part of a launch program to demonstrate the technology's capabilities in real-world automotive applications. For the full year, the company expects its adjusted EBITDA loss to be between $250 million and $275 million.

Looking further down the line, its goal is to have a series-production car in partnership with Volkswagen and PowerCo, featuring its technology on the road by 2029. In the meantime, the company will need to continue testing and scaling up its manufacturing capabilities and building its supply chains.

Management believes its cash runway will extend through the latter half of the decade, suggesting it could operate over the next several years without raising capital. This is important for investors because capital raises can be very dilutive. That said, the company is still a couple of years away from generating meaningful revenue. In the meantime, it remains highly speculative and story-driven, and most investors are best off avoiding the stock for now.

Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.