Up 211% in 2025, is QuantumScape a Solid Buy Before Tomorrow’s Earnings?

The electric vehicle (EV) sector faces mounting hurdles as it strives for mainstream adoption. Weak demand stems partly from the expiration of key EV tax incentives, which once made these cars more affordable for average buyers. Without those subsidies, higher upfront costs deter potential purchasers, especially in price-sensitive segments.

Range anxiety adds another layer, with drivers worried about running out of power on long trips, leading many to stick with familiar gas-powered vehicles. Charging infrastructure lags in rural areas, amplifying these concerns. Battery fires, though rare, fuel safety fears, while long charge times disrupt daily routines. Environmental mining practices for lithium and cobalt raise ethical questions, and supply chain bottlenecks drive up prices.

Amid this backdrop, QuantumScape (NYSE:QS) aims to tackle the core issue: battery limitations. By pioneering a solid-state battery, the company promises quicker charging times and extended lifespan compared to traditional lithium-ion options, potentially easing range fears and boosting EV appeal.

QuantumScape has long focused on solid-state batteries to transform EVs, but scaling production has proved elusive. However, that shifted this summer with a key manufacturing breakthrough involving an advanced separator process that boosts output dramatically — up to 25 times prior levels. This upgrade integrates into prototype lines, paving the way for higher-volume production.

The milestone came with a public demonstration of the technology in a real-world setting, powering a motorcycle and showing viability beyond lab tests. The demo highlighted energy density gains and thermal stability, critical for automaker interest.

While QuantumScape’s revenue remains zero, the firm’s cash reserves should sustain operations for several years yet, offering a runway for further progress. As a potential early leader in solid-state tech, QuantumScape could capture market share if it beats rivals to commercialization, though risks loom for a pre-profit entity.

Although partnerships with legacy automakers remain unconfirmed, they are widely anticipated eventually as validation of its technology.

Analysts maintain a cautious stance on QuantumScape, with a consensus Hold rating on the stock and price targets averaging less than $6 per share — a significant implied 63% downside from its current level of around $16 per share. Even the Street-high $11 per share target calls for a 31% drop.

Considering QS stock has more than tripled so far this year — mostly following the July breakthrough announcement — the battery maker seems to have gotten far out over its skis on valuation.

For the full year, Wall Street projects a loss of about $0.78 per share, an improvement from prior years but still reflecting heavy R&D spending. Cash burn, while managed, exceeds $300 million annually, underscoring the need for milestones.

Near-term breakthroughs seem plausible, given manufacturing strides and ongoing tests, which could include partnerships or further demonstrations to drive sentiment higher. A successful pilot with an OEM or data showing 500 watt hour per kilogram (Wh/kg) density would be catalysts to push QuantumScape’s valuation higher.

However, earnings fallout could swing sharply: beating loss estimates or announcing production deals might spark rallies, but delays could trigger sell-offs in this volatile name. Short interest on QS stock sits above 15%, adding fuel for squeezes on positive news.

QuantumScape reports Q3 earnings tomorrow after the close. With such gains already baked in, should investors buy now or hold off until results clarify the trajectory?

Even if QuantumScape commercializes its solid-state battery, shifting public views on EVs versus internal combustion engines remains tough. Although Tesla (NASDAQ:TSLA) reported a record 497,099 EV deliveries for the quarter, much of that was likely from sales pulled forward to beat the expiration of tax credits. Even Elon Musk is anticipating a rough couple of quarters ahead.

Better battery range and faster charging times might help convince a few more carbuyers to take the EV plunge, but entrenched habits, infrastructure gaps, and cost barriers persist. Solid-state tech could arrive too late if EV momentum stalls further, yet its potential to enable widespread adoption suggests time remains.

This positions QuantumScape as a speculative buy for aggressive, risk-tolerant investors eyeing long-term EV growth. Many analysts still expect EVs to achieve parity in penetration with gas-powered vehicles…eventually. For everyone else, though, sitting on the sidelines and waiting for additional proofs of viability is the safer option.