Earlier this year, interest in electric vehicle battery technology company QuantumScape (NYSE:QS) spiked to a level not seen in a long time. QS stock soared – but those gains are completely gone now.
All that’s left is the distant memory of more hopeful times for QuantumScape’s downtrodden investors.
QuantumScape is still busy working on a potentially game-changing solid-state EV battery. However, the company is also busy burning cash.
Unless something miraculous happens soon, there’s just no compelling reason to own QuantumScape stock.
QS Stock’s 50% Surge: Was It Mostly Short Covering?
Here’s a news item that seems like ages ago, but it actually happened in early January. QS stock surged 50% in a single day because PowerCo, a battery company owned by Volkswagen (OTCMKTS:VWAGY), confirmed that QuantumScape’s solid-state battery passed an endurance test.
In hindsight, it’s reasonable to conclude that this development shouldn’t have justified a single-day 50% share-price increase.
As a Barron’s report stated in January, “It’s a good result, but is may not account for all of the 50% move … Another factor is the short interest.”
The short interest in QS stock was nearly 20%, which is quite high. It’s entirely possible that short covering accounted for the share-price move.
Already, the market seems to have figured out that the Volkswagen-QuantumScape news story isn’t that big of a deal. As of mid-March, QantumScape stock has coughed up all of the gains from that 50% spike, and then some.
Another ‘Big Yawn’ Moment for QuantumScape
QuantumScape’s infrequently updated press releases page is about as interesting as watching paint dry. However, there was a notable announcement on Feb. 14. No, I’m not referring to QuantumScape’s fourth-quarter fiscal 2023 results, which indicates the company’s poor financial position.
In case you didn’t get the memo, QuantumScape has a cash-burn problem. Just to recap, QuantumScape’s position of cash and cash equivalents dwindled from $235.393 million at the end of 2022 to $142.524 million at the end of 2023.
It’s hard to envision the situation getting better anytime soon. Unfortunately, QuantumScape didn’t report any sales or revenue in the company’s quarterly financial report.
QuantumScape’s total operating expenses increased from $113.434 million in 2022’s fourth quarter to $124.64 million in Q4 of 2023.
It was interesting, though, that QuantumScape announced a CEO change on Feb. 14. Specifically, Siva Sivaram replaced Jagdeep Singh in the chief-executive role.
Was this really a “big pivot” moment for QuantumScape, or just another “big yawn?” Sivaram was already QuantumScape’s president, and now he’s the president and CEO of the company.
So, unless Sivaram comes up with a radically different game plan for QuantumScape, investors should probably just expect more of the same.
And by “more of the same,” I mean more cash burn and more unprofitable quarters for QuantumScape. QS stock fell from $7.67 on Feb. 14, to $6.05 on March 8, so perhaps the market isn’t very impressed with the CEO change. QS trades at around $5.70 today.
QS Stock: It’s Fine to Cut and Run
QuantumScape stock is stuck in a rut that it can’t seem to get out of. Even after a 50% share-price spike and a CEO change, the QuantumScape share price lost all of its gains.
Waiting around for a miracle isn’t really a viable investment strategy. QuantumScape’s press releases are infrequent, and the company’s financials are less than ideal. Therefore, it’s wise to stay as far away from QS stock as you possibly can in 2024.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
