By Michael Elkins
Goldman Sachs downgraded Quantumscape (NYSE:QS) to a sell rating from neutral and cut the company’s price target to $5.00 (from $8.00) as the company’s long-time to market will likely result in continued negative EPS and FCF for several years.
Analysts wrote in a note, “Even if/when the technology is commercially ready, we believe per our industry discussions that ramping into volume production as a new entrant could also pressure FCF. With investors increasingly focused on EPS power and FCF in light of the tough macro conditions, we believe that QuantumScape shares will underperform our broader coverage.”
“Additionally,”, they continued, “we believe the broader battery industry is highly competitive. We are expecting industry shipments over the next few years (before QuantumScape even plans to enter volume production) to scale from 507 GWh in 2022 to 1,020 GWh in 2025 (Exhibit 6). This ramp will likely reduce industry costs (we assume battery industry ASPs per kWh fall from $160 in 2022 to $114 in 2025) which will make a higher bar for QS to reach in our opinion.”
Finally, Goldman believes that they could become more positive on the stock if QuantumScape can demonstrate a clearer path to intermediate-term profits and/or increase conviction in its long-term profit potential.
Shares of QS are down 4.94% in pre-market trading on Wednesday.