What Do QuantumScape’s Newly Added Risk Factors Reveal?

California-based QuantumScape (QS) is a battery technology company. It is developing lithium metal-based solid-state batteries for electric vehicles.

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Let’s take a look at the company’s latest financial performance, corporate developments, and newly added risk factors. (See QuantumScape stock charts on TipRanks).

Q2 Financial Results

The company has not started reporting revenue yet. It posted a loss per share of $0.12 for Q2 2021. That compared to a loss per share of $0.06 in the same quarter last year and the consensus estimate of a loss per share of $0.07.

QuantumScape ended Q2 with $1.5 billion in liquidity. For full-year 2021, it estimates cash spending on operations to range from $130 million to $160 million. The company aims to enter 2022 with more than $1.3 billion in liquidity.

Corporate Developments and Plans

In Q2, the company made progress on its San Jose-based pre-pilot manufacturing line called QS-0. It signed a long-term lease for a 197,000 square-foot facility and placed orders for long-lead equipment. QuantumScape aims to be able to produce 200,000 cells annually at its QS-0 site.

QuantumScape partnered with Volkswagen to set up a pilot-line gigafactory called QS-1. It hopes that large volume production at the QS-0 site will help it finalize the industrialization plan for the QS-1 facility.

The company expects to have adequate cash in 2022 to fully fund the QS-0 facility and start QS-1 production. It aims to start providing cells for test cars from the QS-01 facility in 2023 and to begin commercial production between 2024 and 2025.

Risk Factors

The new TipRanks Risk Factors tool reveals 48 risk factors for QuantumScape. Since Q4 2020, the company has updated its risk profile with seven new risk factors.

QuantumScape tells investors to watch out for extreme volatility in its stock price. The company says that factors such as the announcements regarding their Volkswagen partnership and updates about QS-0 and QS-1 projects could affect the price of its stock. It further says the success of its competitors could affect its stock price.

Although QuantumScape is aiming to begin commercial production in the next few years, it cautions that its plans may be delayed. The company says that developing and producing solid-state batteries at scale poses significant challenges. Therefore, there may be cost overruns and delays in equipment installations, permitting, and the startups of manufacturing facilities.

The company tells investors that its tax liability may increase in the future. It cites the Biden administration’s proposal to raise the U.S. corporate income tax rate to 28% from 21%. Another concern is the imposing of a global minimum tax. It says that changes in U.S. and international tax laws could adversely impact its operations and financial results.

The majority of QuantumScape’s risk factors fall under the Finance and Corporate category, with 46% of the total risks. That is above the sector average of 39%. QuantumScape’s shares have declined about 68% since the beginning of 2021.

Analysts’ Take on QuantumScape

In July, Robert W. Baird analyst Ben Kallo reaffirmed a Hold rating on QuantumScape stock with a price target of $26. Kallo’s price target suggests 3.88% downside potential.

Consensus among analysts is a Moderate Buy based on 1 Buys and 2 Holds. The average QuantumScape price target of $34 implies 25.69% upside potential to current levels.