QuantumScape (QS) stock price could crash to $5 if this happens

QuantumScape (NYSE: QS) stock price has been in a strong bearish trend in the past few months as concerns about the company remains. The shares peaked at $13.83 in July and then pulled back by more than 54% to this month’s low of $6.13. 

Numerous concerns remain

QuantumScape is a company that is aiming to change the electric vehicle (EV) industry by building the best solid state batteries. Over the years, the company has made several important milestones as it seeks to start manufacturing in the next few years.

However, the company has faced numerous headwinds along the way. First, competition in the solid-state battery business is rising as several automakers boost their spending the sector. For example, Toyota recently announced a major breakthrough recently..

As part of the breakthrough, the company has made a battery that will not compromise on shorter battery life and weight. It aims to start manufacturing the battery in 2027. Other companies are working on the technology.

Second, there are concerns about the company’s balance sheet since it is a pre-revenue company. In December, the company had over $1.06 billion in cash and short-term investments. These funds dropped to $909.7 million in the last quarterly report. 

In its earnings call, the company said that these funds would be enough to last until 2025 since its expenses are relatively minimal for now. QuantumScape expects to spend between $100 million and $150 million in CapEx and between $225M and $275M in OpEx.

The company also caught many investors by surprise when it priced a $300 million share offering in August. 

Some analysts believe that QuantumScape is a good investment because of its tech advantage. For example, in a recent note, analysts at Evercore ISI said:

“While QS will initially be priced as a premium product (due to higher performance characteristics), if the tech came downstream via a mass market battery player, it could lower the cost curve of the EV battery for the entire industry.”

However, I believe QuantumScape is a high-risk company facing numerous headwinds ahead. I also expect that it will dilute its shareholders again by 2025.

QuantumScape stock price analysis

QS chart by TradingView

The daily chart shows that the QS share price has been in a strong bearish trend in the past few months. It peaked at $13.86 in August after the company published encouraging financial results. The stock remains below the 50-day moving average and the key support level at $8.32, the highest point in April. 

QuantumScape is slightly above the ascending trendline that connects the lowest levels in December, May, and September. Therefore, I suspect that the shares will likely continue falling as sellers target the key support at $5. This view will be confirmed if it drops below the support at $5.75, the lowest point in May.