Retail investors have been conditioned to eschew traditional growth stocks in favor of the next Amazon (NASDAQ:AMZN) or Tesla (NASDAQ:TSLA). And in the historic run that the market has taken investors on, there has been no shortage of potential “next big things.” QuantumScape (NYSE:QS) is no exception. When it entered the market in late 2020, QS stock looked like it couldn’t miss.
This company is using innovative technology to solve a problem that all electric vehicle (EV) manufacturers face. In this case, it’s developing a solid-state lithium battery that will remove a key obstacle to mainstream EV adoption. Specifically, solid-state technology has the potential to allow EVs to travel thousands of miles on a single charge.
News that QuantumScape had solved a key problem in solid-state battery production pushed its stock as high as $130 in a matter of weeks. However, when a company is pre-revenue, like QuantumScape is, there’s little to move the stock but news and rumors — and sometimes both.
That’s a formula that can drive investors up a wall. So, let’s take a realistic look at the case for and against QS stock.
QS Stock: Pushing the Rock Uphill
At many times throughout 2021, the QuantumScape stock chart reminds me of the myth of Sisyphus pushing a rock uphill only to have it roll back down. The latest example of this happened just a few weeks ago. Two pieces of unquestionably good news pushed QS stock briefly above $40 per share.
Yet, in my opinion, the broader market has had it right about QS stock since July. That was about the time when the price stabilized in the $24 range.
Still, all it took were a couple of bullish indicators and QS stock shot higher. And as it has done on many occasions in 2021, the stock failed to hold those gains. I suppose investors could continue to do this indefinitely.
If you’re a true believer in QuantumScape’s solid-state battery production — and you have the time and patience to wait for the product to arrive — there could be a huge payoff. However, there are easier ways to invest in this market.
Silencing Its Doubters
As the year has gone on, QuantumScape has lined up partnerships and recently received a third-party endorsement of its technology. In short, it continues to prove QS stock doubters wrong.
In fact, today, I’m more convinced than ever that QuantumScape will be able to bring its solid-state battery to market. And the company looks to be well capitalized, at least for the moment.
However, investors are realizing that the company won’t be alone in delivering a solid-state battery to market. As InvestorPlace contributor Larry Ramer points out, Israeli company StoreDot appears to be a significant competitor.
Don’t Go Crazy with QS Stock
Markets don’t behave rationally. However, as I noted earlier, prior to its breakout and subsequent collapse in November, QS stock was trading in a defined (if not exactly tight) range. Loosely speaking, whenever the stock went too far below $24, it was a buying signal. Conversely, when it started to creep higher, it went right back down.
That’s a nice premium for a company that’s not going to deliver revenue until 2024 at the earliest. And who knows when QuantumScape will turn a profit?
In addition to investors facing the risk of growing competition, macroeconomic factors appear to be coming into play. Specifically, institutional ownership remains weak and it appears there will be little appetite for these large firms to plow money into speculative stocks.
That means it will remain up to retail investors to push the rock uphill. But that’s not an exercise you need to endure. If you’ve taken a loss on QS stock, it may be time to book that loss and try again when you have more clarity. It’s certainly not a stock that’s worth losing your hair over.
On the date of publication, Chris Markoch did not hold (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.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.