What’s the secret to finding mega winner stocks like Amazon And Nvidia before they rise? It’s no secret. You just need to spot a company that is uniquely positioned to capitalize on a real opportunity before most other investors do the same.
Problem? It’s much easier said than done. For every Amazon and Nvidia, there are also some high-profile implosions like AOL (and then Yahoo!), BlackBerryAnd Groupon. Not every well-promoted ticker lives up to the hype. The company in question really needs to offer a groundbreaking product or service, but it is not always clear if and when they will do so. But if they do, wow!
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With that as background, risk-tolerant investors on the hunt for a potential mega-winner might have a choice to make QuantumScape (NYSE:QS) on their radar when not in their portfolio. This company may be on the cusp of getting electric vehicles over one of their biggest hurdles.
Never heard of QuantumScape? Don’t worry. The company’s $2.5 billion market cap isn’t attracting much attention. It’s also a pre-revenue company, which turns off even more investors.
Nevertheless, there’s enough potential here to deserve a look.
In the simplest terms, QuantumScape designs and manufactures superior lithium batteries. It’s not exactly a new science. Lithium-based batteries have been found in most common consumer electronics for years. Tesla‘s very first car – the Roadster – also used lithium-ion batteries when production first started in 2008. As automakers recognized that this material’s energy storage capacity was necessary to make electric vehicles viable, almost every electric car made since has followed suit. And for most EV owners, these batteries are usually sufficient.
Anyone with their finger on the pulse of the electric vehicle movement probably knows that sales growth is slowing. Although the market itself is still growing, JD Power’s Autovista24 reports that sales growth of battery-powered cars and plug-in hybrids has slowed to 22% in the first half of this year, compared to the 35% growth rate a year earlier. .
The still young industry was hoping for acceleration at this stage of the game.
Causes for these headwinds include high upfront costs, a lack of fast-charging infrastructure and poor battery life. Perhaps more than anything, potential EV owners are concerned about limited driving range on a single charge, without a convenient charging option at their destination.
QuantumScape’s technology addresses all these issues.
It is called a solid state battery. The term doesn’t mean much to the average consumer, or even to a prospective electric vehicle owner. But it should. QuantumScape says its solid-state lithium batteries not only store and then deliver more energy, but can do so for longer than the typical lithium-ion battery used in electric vehicles today.
The numbers: Electric vehicles that can travel 350 miles on a single charge of a regular lithium battery can travel between 250 and 300 miles using one of QuantumScape’s solid-state batteries. They can also charge faster without damage (up to 80% capacity in 15 minutes or less). Perhaps most importantly, testing QuantumScape’s batteries shows that they can still hold a 95% charge even after 1,000 charges. That is approximately 300,000 kilometers of consumption.
As noted, the company hasn’t commercialized anything yet. It’s close though. Last month, the company started delivering its latest prototype to EV manufacturers. Volkswagen has already committed to working with QuantumScape even before the commercial version of the battery design is finalized. It’s also encouraging for QuantumScape shareholders that Tesla CEO Elon Musk announced last month that the EV maker would use solid-state lithium batteries in some of its vehicles early next year, although he did not specify where the underlying technology would come from come. Avoid parent Stellantis plans to start tinkering with the technology in 2026.
Connect the dots. This is the future. As solid-state batteries benefit from the growth of the EV market, they can also help accelerate its expansion again.
In this vein, Polaris Market Research suggests that the global EV battery market will grow nearly 19% annually through 2030. Solid state batteries should drive most of this growth. In fact, Straits Research predicts that the global solid-state lithium battery market will grow by an average of more than 36% over this period.
But the question remains: could a $10,000 investment in QuantumScape now grow into a million-dollar holding within a lifetime?
Considering the potential of the technology and the next likely chapter in the evolution of electric vehicles, this is certainly possible. This company’s market cap of $2.5 billion is almost nothing compared to the solid-state lithium battery market that could ultimately be worth more than $24 billion per year.
Just keep the risk in perspective. There is one lot of it, starting with the simple fact that the company is not selling anything yet. It’s only in the prospect of selling its superior batteries. A second risk is the likelihood of continued losses long after QuantumScape officially begins commercializing its technology. At the same time, newly elected President Donald Trump is unlikely to end the growth of the EV movement, but he could certainly disrupt it.
If you can tolerate the risk and the rest of your portfolio has a stronger foundation, QuantumScape is an attractive prospect.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Amazon, Nvidia, and Tesla. The Motley Fool recommends BlackBerry, Stellantis and Volkswagen Ag. The Motley Fool has a disclosure policy.
Can a $10,000 investment in QuantumScape make you a millionaire? was originally published by The Motley Fool
