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Can the QuantumScape share price hit analysts’ price target post-earnings?

The QuantumScape [QS] share price has climbed 139% since it listed at the end of August 2020, as of 23 July close. Yet that doesn’t tell the whole story behind the volatile QuantumScape share price.

Between 24 August when it started trading at $9.85 and 21 December, the stock climbed over 1,071% to hit a high of $132.70 — making the startup one of the world’s most valuable automobile companies.

From that point, the QuantumScape share price plummeted over 76% as short-sellers started betting against the developer of solid-state lithium batteries. Not helping the stock was a report published in April by short-seller Scorpion Capital questioning the company’s battery performance claims.


QuantumScape's share price rise since end of August 2020


Considering that QuantumScape is still developing its product — for example, it isn’t yet selling batteries — an attack like this is bound to cast doubt in investors’ minds. How the QuantumScape share price responds following its second-quarter results will be closely watched.


What could move the QuantumScape share price post-earnings?

QuantumScape has only reported earnings for the past two quarters. In its first-quarter results, the firm lost $0.20 per share from no sales, which was below analyst expectations. In the fourth quarter, losses per share was $2.41, again from no sales.

The losses aren’t exactly a surprise with analysts not expecting the company to make any sales until 2024, according to Barron’s.

That makes bottom-line figures somewhat meaningless when weighing up a company like QuantumScape. More meaningful measures for the company are whether it’s hitting its milestones and if there are any new products or initiatives to track. In the first quarter, QuantumScape suggested that it would have commercial ready prototypes available in 2022. It also reported that it had started making larger multi-layered batteries. Two areas to watch out for in this week’s earnings report.

In July, JP Morgan analyst Jose Asumendi initiated coverage on QuantumScape, putting a ‘neutral’ weighting on the stock. Asumendi gives credit for developing a solid-state battery but notes the challenges of successfully disrupting the market. The analyst pinned a $35 price target on the stock, which would see a 56% upside on 23 July close.

Among the doubters is Scorpion Capital. In its 188-page report, the short seller said that Quantumscape’s technical claims were misleading and exaggerated, having interviewed 15 experts with links to the battery maker. Although with no actual batteries on the market, it’s difficult to verify the claims one way or another.

Short-seller reports against developers of electric car technology are nothing new. Nikola [NKLA], which expects to start building fuel-cell trucks in the second half of 2023, was described as an ‘intricate fraud’ in a report from short-seller Hindenburg Research, which said the company had misrepresented its technology.


Percentage of QuantumScape’s backers that are institutions


Despite the short interest, Simply Wall St highlights that the current investor composition has a significant institutional weighing. This could provide investors with a degree of reassurance — after all institutions are typically careful in their investment decisions. Institutions account for 27% of QuantumScape’s backers, with Porsche Automobil Holding SE [PA3.DE] being the largest with a 17% stake in the company.

QuantumScape insiders make up 11%, which could be taken as a sign of internal confidence in the product.


When does QuantumScape release Q2 earnings?

27 July.


What is Wall Street expecting?

Wall Street expects QuantumScape to post a loss of $0.07 a share, according to data from Yahoo Finance. The company has an average $44.20 price target, which would see a 97% upside on its 23 July close.  

Both the consensus and Asumendi’s target imply a lot of upside for the QuantumScape share price, which doesn’t necessarily sit with the average broker rating being a hold. This comes down to risk versus reward. QuantumScape might potentially be sitting on breakthrough technology, but it has no commercial products on the market right now. Over the next few years, investors will need to keep tabs on how QuantumScape is scaling up its battery design and validating a production process.

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