On Monday, Deutsche Bank (ETR:DBKGn) resumed coverage on QuantumScape Corporation (NYSE: QS), issuing a Hold rating with a revised price target of $6.00. The new assessment follows the company's recent licensing agreement with PowerCo, which is seen as a significant endorsement of QuantumScape's battery cell technology. The deal is expected to considerably lessen QuantumScape's capital and operational expenditures in the future.
The licensing agreement, which is non-exclusive, permits PowerCo to produce up to 40Gwh of batteries annually using QuantumScape's technology, with the option to double this capacity to 80Gwh.
This increase could potentially supply power to approximately one million units each year, surpassing the initial projections set under the joint venture arrangement.
As a consequence of this partnership, QuantumScape's financial runway is anticipated to extend until 2028, an improvement from the previous forecast of 2026. This extension is partly due to the redirection of $134 million initially allocated for the joint venture and an expected $130 million in royalty prepayments that are contingent on achieving technical milestones.
Furthermore, PowerCo's commitment to the agreement includes the provision of resources and personnel. This collaboration is projected to result in operational and capital expenditure savings for QuantumScape, allowing the company to allocate its funds more efficiently as it continues to develop its battery technology.
In other recent news, QuantumScape Corporation has made significant strides in its strategic collaborations. The company recently secured a licensing agreement with Volkswagen (ETR:VOWG_p)'s PowerCo, extending its cash runway into 2028. This agreement involves a $130 million royalty prepayment to QuantumScape and covers an initial production volume of 40 gigawatt hours per year, with an option to expand to 80 gigawatt hours.
Following this partnership, QuantumScape has shifted its focus towards a licensing model, a move that Truist Securities sees as beneficial for accelerating commercialization and conserving capital. As a result, Truist Securities has revised its price target for QuantumScape to $7 from $6, maintaining a Hold rating on the stock.
These developments have led to a significant reduction in QuantumScape's estimated cash burn, according to Truist Securities. However, the timeline for revenue growth is expected to be longer, and the revenue base is projected to be lower, leading to a modest increase in the discounted cash flow-based price target.
In addition to its partnership with PowerCo, QuantumScape is also engaged in discussions with eVTOL companies, demonstrating the versatility of its technology beyond the automotive industry.
InvestingPro Insights
QuantumScape Corporation (NYSE: QS) has recently garnered attention with its new licensing agreement, reflecting a strategic business move. According to InvestingPro data, the company holds a market capitalization of approximately $2.77 billion. Despite not being profitable over the last twelve months, QuantumScape has more cash than debt on its balance sheet, which may provide some financial stability as it continues to innovate in the battery technology space. Additionally, the company's liquid assets exceed its short-term obligations, suggesting a degree of liquidity that could support its operational needs in the near term.
InvestingPro Tips indicate that analysts are cautious, with two having revised their earnings expectations downwards for the upcoming period. This sentiment is mirrored in the company's stock performance, which has experienced significant volatility recently, including a sharp decline over the last week. QuantumScape's stock generally trades with high price volatility, a factor that investors should consider when evaluating the company's near-term prospects.
For those looking to delve deeper into QuantumScape's financials and stock performance, InvestingPro offers additional tips and insights. There are 11 more InvestingPro Tips available, which could help investors make more informed decisions about their investments in QuantumScape.
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