QuantumScape (Nasdaq: QS) stock price has moved sideways in the past few months as investors assess the company’s future. The shares were trading at $8 on Monday, higher than the year-to-date low of $5. While the stock is up by 56% this year, it remains about 94% below its all-time high.

Solid state battery future

Most experts believe that the future of mobility is electric. Indeed, the number of electric vehicles sold every year has been growing rapidly in the past few years. On Monday, Tesla reported that it produced over 480k vehicles in the second quarter, as we wrote here. This is a notable number since Tesla was a small startup a few years ago.

The biggest challenge for the EV industry is that the battery technology is still behind. While range is improving, the battery technology has some challenges, including its weight and inefficiency.

QuantumScape is a company that seeks to change this situation by developing a solid-state battery. The benefit of these batteries is that they will be light, efficient, and have longer ranges than existing technologies.

In a statement on Tuesday, Toyota said that it was aiming for a breakthrough in solid-state batteries. Keiji Kaita, the company’s head of research said:

“For both our liquid and solid-state batteries, we are aiming to drastically change the situation where current batteries are too big, heavy and expensive. In terms of potential, we will aim to halve all of these factors.”

Therefore, QuantumScape bulls believe that the company will thrive if it makes a breakthrough in its technology. If this happens, the firm will become a crucial part of the EV ecosystem, where it will provide the batteries to other companies. The firm is now eying its commercial production starting from 2024.

QuantumScape has a strong balance sheet. It ended the quarter with $1 billion in liquidity, which is enough to last it to the second half of 2025. This liquidity has likely increased following its February notice.

Therefore, because of its technology and the potential market size, I believe that QuantumScape stock price will do well in the long term. Technicals also support the shares. As shown below, the stock seems to have double-bottomed. It has also moved above the 100-day and 50-day moving averages. Therefore, there is a likelihood that the shares will continue rising as buyers target the key resistance level at $10.

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QS chart by TradingView

Risks to the bullish thesis

The first major risk is if more companies build their solid-state batteries just as Toyota is doing. Most companies are investing billions in this research. As such, if these firms make this breakthrough, demand for QuantumScape’s batteries will be a bit muted.

The second key risk for the QuantumScape share price is the potential for shares dilution in the future. I believe that the firm will ultimately need to raise capital in 2025 as it moves to mass production.

The other risk is that the company’s insiders have been selling shares, as shown below. In June alone, insiders sold shares worth over $1.4 million. Data shows that these insiders have sold stock worth over $29 million in the past 12 months. 

Insider stock sales is not a bad thing since they still hold about 10% of the company. However, the fact that no insider has been buying shares is a risk.

(Click on image to enlarge)

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