QuantumScape Corp. (QS) is engaged in development of next generation solid-state lithium-metal batteries for use in electric vehicles. The company has well-known investors including Bill Gates and Volkswagen (VWAGY). The company's solid-state lithium-metal batteries are expected to have significant advantages over current lithium batteries.
QS has developed a ceramic material that can be used as a solid-state separator in a battery cell. This can significantly reduce charging times and improve performance and fire safety. The firm recently announced that independent third-party tests verified the performance of its batteries.
As of the end of September, the company had $1.5 billion in cash, which compares favorably to only $66 million in long-term debt. Analyst forecast earnings to soar 95.4% year over year in the current quarter.
But the stock looks overvalued with a price-to-book of 9.6, which is well above the industry average of 1.9. QS, which was showing steady performance since early May, has been trending up over the past couple of weeks, as shown in the chart below. This has led to a Momentum Grade of B in our POWR Ratings system.
Take a look at the 1-year chart of QS below with the added notations:
During the first few months of the year, QS formed an important level to watch at the $40 (blue) mark, as that level had provided both support and resistance. QS looks like it’s on its way back up to that level again, and that could bring another test of that $40 resistance.
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A trader could enter a long position on a break above the $40 resistance level with a protective stop placed below it.
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QS shares rose $0.52 (+1.38%) in premarket trading Tuesday. Year-to-date, QS has declined -54.80%, versus a 26.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing.
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