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Tesla (NASDAQ:TSLA) is preparing to lay off over 10% of its staff. Ford (NYSE:F) is slashing the prices on some EVs by as much as $5,500. This is a tough time to invest in EV-associated companies. With an imminent event adding an extra element of risk for QuantumScape (NYSE:QS), you don’t need to buy QuantumScape stock right now.
I understand the appeal of a “forever battery” for EVs. Yet, as the company’s investors have found out the hard way, there’s a disconnect between concept and reality with QuantumScape. The company can’t seem to deliver long-term returns to its shareholders and soon the situation could easily go from bad to worse.
QuantumScape Ships a Battery Prototype Again
Back in December 2022, QuantumScape shipped out its 24-layer prototype lithium metal battery cell to automotive manufacturers. This was a long-awaited event, and it seemed exiting.
Nearly a year and a half later, QuantumScape stock is practically in the same place. There were share-price pops along the way, but the sellers always regained control.
Now, QuantumScape is shipping out prototype battery cells again. On March 27, the company announced the shipments of Alpha-2 battery cells, which are supposedly “more energy-dense than the earlier 24-layer A0 prototype.”
That announcement caused QuantumScape stock to jump to around $6.50. By “tax day,” April 15, the stock was back to $5.50.
Clearly, the market saw QuantumScape shipping out another prototype as a “so, what?” event. This might have been a “wow” moment when interest rates were low and the market was in a more speculative mood. Nowadays, however, the market is warier of unprofitable businesses.
That’s especially true when it’s a company that’s burning capital quickly. In QuantumScape’s case, the company’s position of cash and cash equivalents dropped from $235.393 million at the end of 2022 to just $142.524 million at the end of 2023.
QuantumScape Stock: Mark Your Calendar, Then Run for the Hills
In case you’re still feeling ultra-bullish about QuantumScape, here’s another piece of negative news or two. The company has an almost perfect track record of missing analysts’ consensus quarterly EPS estimates. In fact, the past year has delivered nothing but quarterly EPS misses for QuantumScape.
Very soon, there will be another opportunity for QuantumScape to deliver expectation-beating results (or not). Specifically, the company will release its first quarter 2024 results on April 24 after the market closes.
Maybe there will be a positive surprise and QuantumScape stock will skyrocket. But then, the stock could also drop. Remember, this is a volatile asset with a tendency to go down over time.
Analysts collectively forecast that QuantumScape will have lost 23 cents per share in the first quarter. Even if QuantumScape meets that expectation, another income-negative quarter isn’t anything to brag out.
Plus, we’ll get to find out how much more cash QuantumScape burned through. That’s not something to celebrate, either.
QuantumScape Stock: Avoid or Be Annoyed
Surely, it must have been annoying to watch the market yawn after QuantumScape announced the shipment of another prototype battery cell. All in all, seeing one’s investment in a promising business lose value must be frustrating.
There could be a major turnaround moment on April 24, but don’t count on it. QuantumScape has a poor earnings track record and a less-than-ideal capital position. The prudent policy, then, is to sell QuantumScape stock today and/or avoid it altogether.
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.
