Just a week after it received a crushing downgrade, QuantumScape (NYSE:QS) is enjoying an outstanding day. As the electric vehicle (EV) race has heated up, investors have become increasingly focused on battery producers. At the front of the EV battery revolution is QuantumScape, a dynamic firm invested in solid-state battery (SSB) production. While it’s been a difficult two quarters, the company has survived severe macroeconomic headwinds and has managed to stay mostly in the green recently. QS stock did dip last week after being downgraded by analyst Rod Lache of Wolfe Research. But today, it is rising steadily on much better news. One of the automotive industry’s biggest names has issued a strong, albeit inadvertent, endorsement for QuantumScape’s technology.
This morning, Toyota (NYSE:TM) unveiled some ambitious plans to double down on both EV and EV battery production. And the Japanese automaker made it clear that SSBs are going to form a key component of its new growth initiative. The market has reacted well to Toyota’s news, but QuantumScape is having a better day. Let’s take a closer look at the reasons behind it.
What’s Happening With QS Stock
Toyota’s announcement has sent QS stock up 14% today as positive momentum among EV enthusiasts has grown. There’s a good reason for it. One of the primary objections that has been raised regarding QuantumScape is its SSB technology. Experts have expressed doubts that the technology can be perfected and scaled in a way that would turn QS stock into the “millionaire-maker” that InvestorPlace’s Luke Lango has described it as. While the company’s tech remained on track throughout Q1 2023, there remain skeptics who want to see a product commercialization timeline.
For a major automaker to shift its focus to the same type of tech that QuantumScape is producing is a powerful endorsement. It can be hard to trust a fairly new company that deals in a complicated new technology. But when a name that car buyers have trusted for decades embraces the same tech, it becomes easier for risk-averse investors to see it as a viable product with strong applications. It might be tempting to see Toyota as a new competitor for QuantumScape. But the newer company is a clear leader in the SSB space. It understands that they are the future of the booming EV market. Lango echoes this sentiment. As he recently stated:
“Solid-state batteries are the future, and they represent one of the most promising technological breakthroughs of the 2020s. Just like computers represented one of the most promising technological breakthroughs of the 1980s; the internet represented one of the most promising technological breakthroughs of the 1990s; the cloud represented one of the most promising technological breakthroughs of the 2000s.”
If Lango’s bullish hypothesis is even slightly correct, QS stock has the potential to soar to truly impressive heights. InvestorPlace markets analyst Thomas Yeung sees it as having a 500% growth potential.
What Comes Next
As noted, QuantumScape still has hurdles to overcome before it can conquer the SSB market. But there’s little doubt that if it can, the company’s technology will transform the EV industry, a sector that is still transforming how the world travels. It’s clear that EV batteries need to be improved if companies are going to continue to scale production. Toyota has accepted Lango’s case that SSBs are the future that automakers need to embrace. Other companies are likely to follow its example, thereby boosting QS stock even more as the company draws nearer to the updates that investors want to see.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
