Should You Buy QuantumScape While It's Below $4.50?

Battery technology is at the heart of the electric vehicle (EV) revolution, and over time, these batteries have evolved from bulky, low-efficiency power sources to the high-density energy packs we see today. This technology has pushed EVs forward, but further improvements could be made.

That's where QuantumScape (NYSE: QS) enters the picture. QuantumScape is developing next-generation battery technology that should enhance performance and efficiency. This technology allows for fast charging and longer battery life, which could address some of the major challenges EVs face today.

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The company is reaching some critical milestones. However, it remains pre-revenue and has burned cash since going public in 2020. QuantumScape stock is around an all-time low. But is it a good buy today?

QuantumScape's battery technology is pushing forward

QuantumScape develops advanced solid-state lithium-metal batteries that could significantly improve energy density, charging speed, and safety compared to traditional batteries. The higher energy density allows for longer driving ranges and smaller vehicle sizes with less weight. It says vehicles could get up to 400 to 500 miles on one charge with its batteries, which also benefit from having a longer battery lifespan.

Volkswagen formed a joint venture with QuantumScape in 2012 and has invested over $380 million in the battery maker to develop and scale up its battery production.

Last year, QuantumScape hit a significant milestone when it shipped a low-volume batch of B0 samples, which are its near-production battery prototypes used for advanced testing and performance validation. The low-volume production of its QSE-5 solid-state lithium-metal battery cell was part of what QuantumScape calls the Raptor separator process.

This is the first stage of its separator heat treatment process, which enables faster separator production. Next is its Cobra separator process, which will streamline separator manufacturing, allow for more efficient, higher-volume production, and help QuantumScape get closer to commercial production.

In its first-quarter letter to shareholders, QuantumScape management said it is ahead of schedule in getting its Cobra separator process into baseline production. The company remains on track to ship QSE-5 B1 samples by this year, supporting further field testing in 2026.

Image source: Getty Images.

Keep an eye on its finances

The big question for investors is when QuantumScape will start generating meaningful revenue. Right now, the company is pre-revenue, so capital is crucial. At the end of the first quarter, the company had around $860 million in liquidity, or enough capital to extend into the second half of 2028, according to management.

This is good news for investors in the near term because the company doesn't have immediate cash needs. That said, QuantumScape will need to continue progressing with its production and manufacturing processes, and investors will need to be patient.

Analysts covering the company project that QuantumScape won't post any revenue until 2026. Even so, they project the revenue will be around $3.8 million. Analysts see revenue accelerating in 2027 to $50.6 million and then exploding higher in 2028 to $490.6 million as the company reaches commercial scale.

Investors should take a wait-and-see approach

QuantumScape's battery technology could revolutionize EVs and make them more appealing for widespread adoption. However, the company is still going through production and testing phases, and it will be several years before it begins to generate meaningful revenue. Investors purchasing shares today will need to be patient as the company progresses.

That said, the stock is vulnerable to further declines, especially if its development timeline gets pushed back for any reason. While I'm intrigued by the company and its technology, most investors are best off keeping this stock on a watch list and monitoring its progress toward commercialization.

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