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tesla (NASDAQ:TSLA) is preparing to lay off more than 10% of its staff. ford (New York Stock Exchange:F) is reducing the price of some EVs by up to $5,500. Now is a tough time to invest in EV-related companies. Imminent events add an additional element of risk. quantum scape (New York Stock Exchange:QS), there is no need to buy QuantumScape stock right now.
I understand the appeal of EV's “perpetual battery”. But as the company's investors have painfully discovered, there is a disconnect between concept and reality for QuantumScape. The company is unlikely to be able to provide long-term returns to shareholders, and the situation could easily worsen soon.
QuantumScape ships battery prototype again
Back in December 2022, QuantumScape shipped a 24-layer prototype lithium metal battery cell to an automaker. It was a long-awaited event, so I was really looking forward to it.
Now, about a year and a half later, QuantumScape's stock is in about the same position. There were some steep drops in stock prices along the way, but the sellers always regained control.
Now, QuantumScape is shipping prototype battery cells again. On March 27, the company announced the shipment of its Alpha-2 battery cells, which are said to have “higher energy density than the initial 24-layer A0 prototype.”
The announcement sent QuantumScape's stock price soaring to around $6.50. By “Tax Day” on April 15th, the stock price was back to $5.50.
Clearly, the market assumed “so what?” when QuantumScape shipped another prototype. event. This may have been a “wow” moment when interest rates were low and the market was in a more speculative mood. However, the market is currently becoming increasingly wary of unprofitable businesses.
This is especially true for companies that are rapidly consuming capital. In the case of QuantumScape, the company's cash and cash equivalent position decreased from $235,393,000 at the end of 2022 to just $142,524,000 at the end of 2023.
QuantumScape Stock: Mark your calendar and run for the hills
If you're still feeling very bullish about QuantumScape, here's one or two more pieces of negative news. The company has a near-perfect track record of missing analyst consensus quarterly EPS estimates. In fact, over the past year, QuantumScape delivered a quarterly EPS miss.
There will soon be another opportunity for QuantumScape to deliver results that exceed expectations (or not). Specifically, the company plans to announce its financial results for the first quarter of 2024 on April 24, after the market closes.
Perhaps there will be a positive surprise and QuantumScape stock will skyrocket. However, the stock price may fall after that. Please note that this is a volatile asset that tends to go down over time.
Analysts consensusly expect QuantumScape to report a first-quarter loss of 23 cents per share. Even if QuantumScape lives up to expectations, another quarterly negative profit is nothing to brag about.
Additionally, you can see how much cash QuantumScape has consumed. That's not something to celebrate either.
QuantumScape Stock: Avoid or Frustrate?
Indeed, it must have been annoying to see the market yawn after QuantumScape announced the shipment of another prototype battery cell. All in all, it must be frustrating to see an investment in a promising business lose value.
There may be a big turning point on April 24th, but don't count on it. QuantumScape's earnings history has been poor, and its capital position is less than ideal. Therefore, the prudent course is to sell QuantumScape stock today or avoid it altogether.
Publication date, David Mordell did not have any positions (directly or indirectly) in any securities mentioned in this article. The opinions expressed in this article are those of the writer and are influenced by InvestorPlace.com. Publishing guidelines.
