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QuantumScape (QS) stock is refusing to fade on Friday after its 30% Thursday session spike with shares of the automotive battery maker adding another 17% at the time of publication. The successful price action demonstrates that bulls are taking the company’s partnership with Volkswagen (VWAGY) quite seriously, which bodes well for a continued rally in the beaten-down stock.

In past episodes (and there have been many) in which good news fomented a spike in the share price, QuantumScape traders quickly abandoned ship, taking profits with them. This time is starting to look different however.

The broad market is also getting in on the party as optimism for a September interest rate cut from the Federal Reserve (Fed) continues to usher those on the sidelines back into equities. Thursday’s Consumer Price Index (CPI) report for June showed US inflation receding with headline prices actually declining from the previous month — a rarity.

The NASDAQ has gained 1.1% at the time of writing, while the S&P 500 climbs 0.9% and the Dow Jones Industrial Average adds 0.8%.

QuantumScape stock news

QuantumScape announced on Thursday that its patented solid-state battery technology will begin its first commercial production event with Volkswagen’s PowerCo battery unit. 

Upon certain undisclosed royalty payments, PowerCo will begin producing lithium-metal batteries via a non-exclusive license from QuantumScape. PowerCo has the right to produce up to 40 gigawatt-hours (GWh) of batteries annually with the present agreement, which would allow for the production of half a million electric vehicles (EVs).

QuantumScape’s solid-state batteries are a paradigm shift away from the industry’s current reliance on lithium-ion batteries. Solid-state batteries are cheaper to manufacture and offer much longer battery ranges for drivers.

However, another option would allow Volkswagen to double that production figure to 80 GWh per year if further details were hammered out.

“Combining our cutting-edge technology with PowerCo’s expertise in manufacturing and industrialization, this deal establishes a blueprint for a capital-light business approach and positions us at the forefront of energy storage innovation,” said Dr. Siva Sivaram, CEO and president of QuantumScape, in a statement. “Working closely with PowerCo as our first customer will help us accelerate commercialization and adoption of these game-changing batteries together.”

Volkswagen is already the largest shareholder of QuantumScape, and the new agreement means that PowerCo CEO Frank Blome has to leave QuantumScape’s board of directors in order to manage this production phase.

This agreement is thought to be the first of many for the battery maker, which seems intent on licensing its technology rather than producing battery cells in-house. For its part, Volkswagen is coming off another agreement with an upstart EV firm, the one with Rivian (RIVN) just announced in late June. That one has Volkswagen investing as much as $5 billion in Rivian in order to use electrical, platform, and software licenses from the latter for the German company’s own vehicles.

Wall Street was overjoyed with the breakthrough for QuantumScape. UBS analyst Joseph Spak pointed out that the agreement lays out a blueprint for further agreements with other automakers under a capital-light model. Morgan Stanley analyst Adam Jonas said the announcement portends lower risk of future dilution and said he was now leaning toward his bullish target for QS stock of $17.

Baird pointed out that besides Volkswagen, QuantumScape is working with a number of other automakers, and further production partnerships would push the share price much higher.

QuantumScape stock forecast

QuantumScape stock is now trading at levels on Friday it has not seen since early January when a sudden rally pushed shares above $10 temporarily before slumping back to a yearly low of $4.67 on June 27.  The stock is on its way toward doubling since then in just the last two weeks.

It seems likely that bulls will push for $10 at the very least during this rally, but it would be unsurprising if shares rise further than that. The 261.8% Fibo Retracement arrives at $9.25 and the 361.8% Fibo comes at $11.00.

Judging from the February 12 range high, there may be support around $8.00 or at the 161.8% Fibo at $7.50.

(Click on image to enlarge)

QS daily stock chart

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