JPMorgan initiates QuantumScape coverage: should you buy or sell QS stock?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 21, 2021
  • JPMorgan Wednesday initiated the coverage of electric vehicles battery manufacturer QuantumScape.
  • JPM analysts issued a neutral rating on QS shares but maintained an upbeat outlook long-term.
  • Should you invest in QS stock now?

JPMorgan analysts Wednesday initiated their QuantumScape Corp (BMV:QS) coverage with a neutral rating but maintained an optimistic view in the long term. 

QuantumScape developed the solid-state lithium-metal battery technology, replacing the polymer separator used in conventional batteries. 

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JPM analysts said the risks associated with developing the technology to a commercially viable state weigh heavily on the company’s ability to disrupt the electric vehicle battery market eventually. Therefore, they initiated their coverage on QS shares with a neutral (hold) rating but maintained an upbeat view long term. JPM has a June 2023 price target of $35 on QS shares.

Should you buy QuantumScape stock in Q3 2021?

QuantumScape’s disruptive EV battery technology could disrupt the market in the long term. However, as JPM points out, there are significant development and marketing risks that will weigh the company’s bottom line in the near term.

The San Jose, Calif-based auto parts company is yet to turn profitable, but things could change in the next couple of years, with analysts expecting the bottom line to improve by more than 90% this year before growing by about 9.5% next year.

Therefore, QuantumScape could be a great addition to your portfolio if you target stocks that could be disruptive in industries like the EV battery market. Several automakers plan to shift towards EVs, with some like General Motors Co. (NYSE:GM) having a 2035 goal of phasing out internal combustion engines.

Source – TradingView

Technical overview: QuantumScape stock price prediction for Q3 2021

Technically, QuantumScape shares appear to have recently rebounded to avoid falling to oversold conditions. The QS stock price is now up more than 11% since bottoming at $21.72 on Monday morning. However, it continues to trade below the 100-day moving average line after crossing beneath towards the end of March.

The rebound could continue before the QS share price hits overbought conditions, but the trend indicates bearish pressure. Therefore, investors can target short-term profits at $30.92, or higher at $38.59, just off the consensus Street price target of $40.00. The support levels are $17.56 and $11.59.

Bottom line: why buy the QS stock rebound?

Although QuantumScape shares still trade under bearish pressure, the current rebound could continue further, presenting a short-term investment opportunity. However, analysts remain cautious despite providing a high price target of $40, meaning if you are not a long-term investor, it may be wise to buy QS stock and sell after a short period.

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