EV battery maker QuantumScape (NYSE: QS) just had one of its best days in a long time. On June 25, shares rocketed up around 30%, marking the stock’s biggest single-day gain since July 2024. The stock’s surge comes as the company announced the integration of its “Cobra Separator Process” into its battery production.
QuantumScape is on a mission to build the EV battery technology of the future. So, what does the company’s latest announcement mean, and what is QuantumScape’s value proposition? Additionally, how does Wall Street feel about the stock going forward?
Cobra Creates Key Advancements to Lower Costs and Raise Scalability
QuantumScape's Cobra separator process increases efficiency in the production of ceramic separators. Ceramic separators are crucial parts of QuantumScape’s batteries. They help ensure safety and extend battery longevity. However, they are difficult to make.
Heat treatment is one of the most important processes in making ceramic separators, providing strength and conductivity benefits.
With Cobra, QuantumScape can reduce the time it takes to heat-treat ceramic separators by 25 times compared to its previous process, Raptor. This greatly speeds up production capacity and reduces the energy costs involved in producing each unit.
Additionally, the company says Cobra “occupies a fraction of the physical space” of Raptor. This could potentially allow for a decrease in overhead costs or reduce the speed at which these costs increase.
Overall, Cobra is very important for two key reasons: reducing costs and allowing much higher production capacity. These are extremely key factors to the company’s batteries being commercially viable. They mean the cost of the EVs the company's batteries are in can come down, making consumers more likely to purchase them.
However, the company still has no revenue and is worth approximately $3.2 billion. So, why are markets placing so much value on this firm?
The answer lies in the potential of its tech to revolutionize the EV industry and address key consumer pain points.
QuantumScape’s Battery Longevity Could Make It a Leader in EV Power
QuantumScape is attempting to address prospective EV buyer concerns, with battery longevity at the forefront. A 2024 study from EY, a Big Four accounting firm, found that high battery replacement costs are the main reason U.S. consumers hesitate to buy an EV. The cost of buying a new EV battery can range from $6,500 to $20,000.
These worries persist even though MotorTrend estimates EV batteries should last from 11 years to over 20 years. However, when it comes to consumer products, oftentimes perception is equal to reality. The EY study demonstrates this. It found that the percentage of consumers who intend to purchase an EV fell from 48% in 2023 to 34% in 2024 even though advancements continue.
This is where one of QuantumScape's core value propositions comes into play. Back in January 2024, shares surged over 43% in one day. This happened after PowerCo, a subsidiary of automaker Volkswagen (OTCMKTS: VWAGY), announced QuantumScape’s battery passed its endurance test.
The test found that QuantumScape’s battery could undergo 1,000 charging cycles, yet still retain 95% of its battery capacity. The Department of Energy reported the average EV battery capacity in 2024 is 284 miles. This would equate to 284,000 miles of operation for QuantumScape’s batteries while still maintaining 95% of their original capacity.
The Federal Highway Administration estimated that the average U.S. driver travels around 13,500 miles per year. This equates to nearly 21 years of use for QuantumScape’s batteries while still retaining 95% capacity.
EV batteries are often considered to need replacement when they reach 80% of original capacity. In theory, QuantumScape’s batteries could last 80-plus years before reaching this threshold. That far exceeds the 20-year lifespan that MotorTrend estimates for the best batteries today.
Thus, QuantumScape’s technology is addressing a key concern among consumers. Their tech has the potential to substantially increase EV adoption, giving the firm a potentially robust competitive advantage.
Analysts Are Bearish on QS Near-Term, But Long-Term Potential Is Undeniable
The MarketBeat-tracked consensus price target on QuantumScape is $5.19.
This implies a 10% downside from their June 25 closing price.
The outlook is worse when considering that two price targets released in late April come in at $2.50.
Given the divergence between the firm's sales and market cap, this is not entirely surprising.
Markets are clearly placing high expectations on QuantumScape, believing that it may be able to revolutionize the EV industry.
Overall, QuantumScape remains a speculative bet at this point, although the huge potential of its technology is hard to ignore.
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