Interactive Investor

There’s something going on with this battery maker

10th August 2021 10:19

Alistair Strang from Trends and Targets

Our charts specialist considers the merits of a US-based lithium battery firm.

If the claims are anything to go by, there's something different going on with lithium batteries maker QuantumScape Corp, especially as they threaten to turn the electric vehicle market on its head.

Their first headline; "Charging to 80% of capacity in under 15 minutes!" should suffice to get peoples attention but when browsing the plethora of information and claims, the company could easily become a disruptive influence to the entire battery market.

With VW already on board and claims of a sufficient funds to take their product to market, we really should not be surprised at receiving a bunch of emails asking us to cast an eye over the share price.

The new battery is described as 'Solid State', fast charging, long lasting, non-combustible (quite a big deal) and capable of holding double the power of current premium lithium-ion batteries.

It all sounds quite exciting which begs the question, why is a share which traded at $132 after its launch now languishing at just $24 US.

Obviously, there's an often distasteful trajectory followed by share prices, following a launch and we're inclined to view QuantumScape as no different from many, many, others.

In fact, we're a little surprised the share price has not yet enacted the critical second surge, the one which, if the price exceeds the post-launch high of US $132 will suggest the sky is the limit.

This turn of phrase is liable to prove justified, if the claims of the new battery translate to real life. The current nonsense, promising flying taxi services in exotic locations, tends fall apart, due to battery power and life.

However, if this companies product lives up to the blurb in their press releases, things could become quite interesting throughout all aspects of the electric vehicle market.

Of course, there is ointment and there is a fly.

The online tech magazine, "WIRED", took a deeper review of the company claims and frankly, their article gushed praise on the product. Then opted to mention an important caveat.

All the test results were produced from individual lithium cells, rather than complete batteries. An actual battery will comprise of around 100 lithium cells, creating a battery the size of a cigarette packet.

An electric vehicle will typically require several hundred on these finished batteries. At the time of WIRED's article, the company had not yet tested a fully built battery. The company boss says, confidently, "It's not a question of whether this will work or not. It's just a question of engineering."

The WIRED article finishes, mentioning a couple of companies which previous raised huge sums, promising game changing batteries. They crashed, when their performance failed to match expectations.

However, on the basis all this smoke must be fuelled by fire, perhaps this shall indeed be an opportunity to get involved at the ground floor level for a new product. Perhaps some research shall be justified.

Near term, presently trading at $24, the price needs exceed $27.7 to suggest imminent share movement to an initial $33.

If exceeded, our secondary works out at $41.25. In the grand scheme of things, neither ambition is particularly interesting but, should our secondary be exceeded, things are liable to improve quite fast. 

There is the potential of a heck of a jump toward $108, a level at which we'd anticipate some hesitation.

The share price needs below $15.8 to provoke real concern, thanks to our drop target being prefaced by a minus sign!

 

Source: Trends and Targets. Past performance is not a guide to future performance

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea.