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Almost overnight QuantumScape (NYSE:QS) has gone from “supercharged” to “unplugged” with Wall Street. But is now a good time to buy shares of this cutting-edge electric vehicle (EV) stock? Let’s look at what’s happening off and on the price chart of QS stock for clues, then offer a risk-adjusted determination aligned with those findings.
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For the record, shares of QS never walked on water. But less than a month ago and in under four trading weeks after debuting on the NYSE, QuantumScape did charge into the high heavens with a 450% gain.
QuantumScape is a Silicon Valley-based startup that enjoys the blessing, or more aptly the backing, of auto giant Volkswagen (OTCMKTS:VWAGY), as well as Microsoft’s(NASDAQ:MSFT) Bill Gates.
In of itself, that kind of support is going to draw attention. And for good reason, right? But it doesn’t stop there for believers of QS.
A Closer Look at QS Stock
QuantumScape’s solid-state quantum lithium-metal battery technology has been lauded as the Holy Grail of batteries. At its core, the composition has a significantly higher energy density than today’s lithium-ion batteries. And if QS delivers as promised, it’s technology will take electric vehicles further into the mainstream.
This past month the secretive startup showed the world what 10 years and $300 million in R&D promises, without divulging the company’s “secret sauce.”
QuantumScape’s test results were apparently impressive, and the great reveal drove QS stock’s meteoric rally. That’s the good news. But cracking this 40-year-old battery problem still falls well-short of real-world applicability.
The massive scaling-up process for commercialization still poses potential significant knowledge gaps and obvious room for outright failure. And if the technology does work some day? Well, that’s still a handful of years or more removed from 2021.
QS Stock Daily Price Chart
Over the past few weeks, investors have woken up to the challenges with a bearish critic or two and S-1 filing fears acting as primary drivers.
Reasonably, within the framework of an extremely optimistic $20 billion valuation and frothy EV market, this could be a terrific spot to pick up the battery-maker at a substantial discount.
The Bottom Line on QuantumScape Stock
QuantumScape also has more than $1 billion in its war chest. The cash is enough to carry the company’s battery technology into production. But whether it will work is the $20 billion question.
What I’d propose for intermediate-term or long-term QS investors is to hedge stock exposure with a collar strategy that can be traded around shares over time.
But as the company’s post-Christmas funk attests, when stock volatility becomes a two-way street, the defined risk attributes and flexibility of this strategy shine and offer real-world trading results bulls and bears can only dream about.