William Blair has reaffirmed its Market Perform rating on QuantumScape (NYSE: QS), despite the electric battery technology company witnessing a substantial surge in the QS share price.
QuantumScape’s stock notably closed trading on Wednesday at $5.67, representing an impressive daily increase of 30.95%. However, shares have slightly retraced pre-market Thursday, dipping 1.76% to $5.57.
What Wall Street says about QS stock
Analyst Jed Dorsheimer at William Blair cautioned investors that this recent rally might be excessive, considering the underlying financial fundamentals. According to their assessment, the increase in share price largely stems from investor enthusiasm regarding QuantumScape’s solid-state battery technology, particularly driven by the commissioning of its Cobra manufacturing line. However, William Blair stresses that this was a well-anticipated event rather than a market surprise.
The research firm points to historical precedents to underscore its cautious stance. For instance, in January 2024, QuantumScape’s stock surged nearly 50% following a Volkswagen (ETR: VOWG_p) announcement that simply reiterated previously known battery cell data.
Similarly, July 2024 witnessed a 30% jump in QuantumScape’s shares after the announcement of a shift in its relationship with Volkswagen from a joint venture to a licensing arrangement. In both instances, the price gains proved temporary as shares reverted to previous trading levels.
Despite these patterns, QuantumScape maintains a strong liquidity position, boasting $860.3 million in cash, and a robust current ratio of 16.66, significantly outweighing its debt obligations. Nonetheless, analysts remain cautious due to continued significant financial losses and do not anticipate QuantumScape reaching profitability within this fiscal year.
Looking ahead, Dorsheimer emphasizes the need for clarity regarding QuantumScape’s “potential launch customer and unit economics.” These factors, analysts suggest, will be pivotal in accurately assessing the company’s long-term growth and sustainability.
Overall, William Blair’s stance implies that investors should approach the recent stock rally with caution, considering the historical volatility and current financial realities surrounding QuantumScape.
