Is QuantumScape Stock a Buy Now?

Electric vehicles (EVs) have emerged as a viable alternative to combustion engines. But today's consumers expect longer range, faster charging, and lower prices. The lithium-ion batteries EVs run on have approached their limits. QuantumScape (NYSE: QS) is developing a potential solution.

The company's solid-state lithium-metal battery technology could deliver the performance and pricing that consumers need to accelerate the transition to electric vehicles. However, QuantumScape isn't an investment for the faint of heart. The stock peaked at over $130 around 2021 and has fallen to under $4 today.

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Should investors buy the stock now, or is QuantumScape too far gone? Here is what you need to know.

QuantumScape went public too soon

There isn't much you can say about a stock that has done little since 2021 aside from generating catastrophic losses for investors.

However, it is helpful to understand why this is the case before delving deeper into whether the stock is investable in 2025. QuantumScape's primary issue is that it went public way too soon. The company is developing solid-state lithium-metal battery technology for electric vehicles and other applications. The key word here is this one: "developing." QuantumScape hasn't sold anything yet.

Having no sales or profits alone doesn't ruin a stock, but it's a red flag, to say the least, especially when you consider that QuantumScape began trading four years ago. Going public allowed the company to raise money, and doing it during a stock market bubble from 2020 to 2021 was, admittedly, brilliant timing from a fundraising standpoint. Unfortunately, it hasn't benefited shareholders, so the company needs to demonstrate that it has a viable path to rewarding those who invest new money in the stock.

The business could get off the ground next year

Looking beyond QuantumScape's non-existent revenue, there are some positive signals. The company is very well funded for the immediate future. It ended 2024 with $910 million in cash and zero long-term debt. Management believes it has sufficient funding to last until the second half of 2028. In other words, investors can afford to buy shares and wait for the business to get going.

QuantumScape is preparing to begin commercializing its technology, with an initial launch goal for next year. The company has partnerships with the Volkswagen Group, which also owns brands such as Porsche, Audi, Ducati, Bentley, Lamborghini, and Bugatti, as well as PowerCo, a battery manufacturing company founded by the Volkswagen Group. Additionally, QuantumScape is targeting personal electronics, so the stock isn't a pure play on the automotive industry.

For now, analysts project only $3.5 million in revenue for 2026; however, this figure might change as the situation evolves. The Volkswagen Group could help drive initial sales. After that, growth will depend on QuantumScape's ability to market and sell its product successfully.

QuantumScape is still a speculative investment and has yet another red flag

The stock still has a $2 billion market cap despite its plunge, so investors are taking a risk buying shares here. Even if the company were to generate $100 million in revenue by 2027, that would still value the company at 20 times hypothetical sales two years into the future.

Another red flag to watch for is QuantumScape's willingness to expand the share count. The company has issued stock to raise capital and paid out significant amounts of stock-based compensation. I'm not saying whether that's right or wrong, but it comes at a cost that shareholders will bear.

You can see how QuantumScape's share count has gradually increased, resulting in share dilution that diminishes the stock's upside, as revenue and profits are spread more thinly across a larger number of shares.

QS Average Diluted Shares Outstanding (Quarterly) data by YCharts

Is the stock a buy now?

QuantumScape's healthy cash position should sustain the business until it begins selling its battery technology. Unfortunately, survival doesn't always translate to a positive investment outcome.

The stock's valuation already assumes a lot, meaning there is still potential for downside if anything goes wrong. Perhaps QuantumScape doesn't launch next year, or it struggles to grow sales. It is unclear when QuantumScape will turn a profit, but it's likely at least several years away.

It's tempting to view QuantumScape as cheap after such a dramatic decline, but it looks more like a value trap than an opportunity. Investors should consider waiting for further business developments before risking throwing good money after bad.

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.