Could Buying QuantumScape Stock Today Set You Up for Life?

Key Points

• QuantumScape is an early mover in the solid-state battery market.

• It will license its designs to Volkswagen and other automakers.

• But a lot of growth is already baked into this high-flying stock.

• 10 stocks we like better than QuantumScape ›

QuantumScape (NYSE: QS), a developer of solid-state lithium batteries, hasn't commercialized any of its products or generated any revenue yet. Nevertheless, its stock rallied nearly 120% over the past 12 months and boosted its market cap to $7.2 billion.

The bulls rushed to the stock in anticipation of its upcoming batteries. Is too much growth already baked into its high-flying shares, or could it skyrocket and set you up for life?

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What does QuantumScape do?

QuantumScape's batteries generate power with solid-state electrolytes instead of the liquid electrolytes used in traditional lithium ion batteries. Its batteries have higher charging capacities, faster charging times, and better thermal resistance than their lithium ion counterparts.

However, solid-state batteries are also more expensive and challenging to manufacture, so they've only been mass-produced for smaller devices like pacemakers, wearables, and Internet of Things gadgets -- instead of mobile devices or electric vehicles (EVs).

QuantumScape, which is backed by Volkswagen (OTC: VWAP.Y), wants to change that perception by bringing its QSE-5 batteries to the EV market. Those batteries have an energy density of 844 watt hours per liter (Wh/L) and can be rapidly charged from 10% to 80% in 12.2 minutes. By comparison, most of the lithium ion batteries used in EVs have an average density of 300-700 Wh/L with an average fast charging time of 20 minutes to an hour.

When QuantumScape went public by merging with a special purpose acquisition company (SPAC) in 2020, it claimed it could commercialize its first batteries by 2024. But as of this writing, it's only shipped a few samples to its automotive partners. Analysts expect it to only slightly narrow its net loss from $478 million in 2024 to $457 million in 2025.

Why are the bulls so excited about QuantumScape?

QuantumScape is still a highly speculative stock, but there are a few clear catalysts on the horizon. In late June, it started the baseline production for its new Cobra separator process -- which represents a major leap forward from its previous Raptor process in terms of cell reliability, equipment productivity, and total yields. That upgrade should support QuantumScape's shift from the low-volume production of its samples to a high-volume process by the end of 2025.

QuantumScape initially planned to manufacture its own batteries, but it abandoned that capital-intensive plan and pivoted toward a capital-light licensing model last July. Its first major customer will be Volkswagen's battery division PowerCo -- which has already run thorough road endurance, fast-charging, and safety tests with the battery maker. This September, PowerCo presented its first live demonstration of a Ducati motorcycle running on a QSE-5 battery.

QuantumScape also expanded its partnership with Volkswagen this July and secured additional milestone payments to extend its cash runway through 2029. Analysts expect it to finally generate $5 million in revenue in 2026, and for that figure to surge to $62 million in 2027 as it starts licensing its QSE-5 commercial designs to Volkswagen and other major automakers. But it's only expected to slightly narrow its net loss to $422 million in 2026 and $392 million in 2027.

But could QuantumScape's stock set you up for life?

The solid-state battery market could expand at a compound annual growth rate of 56.6% from 2025 to 2030, according to Grand View Research. As an early mover in this nascent market, QuantumScape is well-positioned to profit from that rapid secular expansion. However, it still faces intense competition from big automakers like Toyota and similar start-ups like Blue Solutions. If those competitors commercialize their solid-state batteries first, QuantumScape could quickly lose its luster.

With a market cap of $7.17 billion, QuantumScape is already richly valued at 116 times the revenue it's expected to generate in 2027 -- and that rosy outlook assumes everything goes right. Therefore, its stock could be easily cut in half and still be considered expensive relative to its near-term growth potential.

So for now, I wouldn't call QuantumScape a stock that could "set you up for life" at these levels. Instead, it's a stock which might be worth nibbling on if you believe its solid-state batteries will disrupt the aging lithium-ion battery market before its competitors cross the finish line.

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