QuantumScape Stock Falls. Earnings Aren’t the Problem.

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Solid-state battery technology company QuantumScape reported a wider-than-expected loss for the first quarter. Shares were down after the report, but earnings might not be the trigger.

QuantumScape

(ticker: QS) reported a loss of 21 cents a share from no sales. Wall Street was looking for a loss of 15 cents a share from no sales.

Shares were down 2.8% in after-hours trading Tuesday. The miss isn’t meaningful though since the company is still in the development stage. Significant sales are still years away.

Recently, investors have been shunning more speculative growth stocks. At the close of Tuesday trading, QuantumScape stock was off about 35% year to date. Similarly, the

Russell 1000 Growth index
was down 20% year to date. For comparison, the

S&P 500
and

Dow Jones Industrial Average
have shed 12% and 9%, respectively, so far this year.

From a financial perspective, the quarter looks fine. QuantumScape spent about $39 million on capital expenditures, in line with management guidance. For the second quarter, the company expects to spend about $35 million to $65 million on capital expenditures, similar to the first quarter’s spend.

There were no changes to the company’s spending plans for the full year. QuantumScape still expects to spend about $325 million to $375 million on capital expenditures and about $225 million to $275 million on operating expenses. The company should have about $800 million in liquidity entering 2023.

From an operational perspective, the company made progress. The company tested battery cells stacked with 16 layers, achieving battery performance similar to their single-, four-, and 10-layer cells. QuantumScape has to build up its battery cells—which are a little like a deck of cards—layer by layer to prove its tech can work inside a vehicle that will charge hundreds of times and travel tens of thousands of miles over its life.

QuantumScape’s solid-state battery technology is years away from commercialization, but it’s promising. These batteries promise lower cost, better charge time, more safety, and greater longevity than conventional lithium-ion batteries.

Still, with sales a long way off, investors are left measuring the company against its milestones. Next up for the company are cells with more layers and the construction of a pilot manufacturing plant. The pilot plant, dubbed QS-0, will help demonstrate that the cells can be manufactured at scale. QS-0 should be shipping samples to automotive customers at some point in 2023, according to the company.

Milestones are important for any company, but so are market conditions. At a moment when interest rates are rising and inflation rages, investors don’t like speculating.

Write to Al Root at [email protected]