Editing QuantumScape
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With an enterprise value above $6bn representing 1.4x EV/2028E revenue of $4.1bn, QS’ multiple is already almost in-line with the average of its well established li-ion battery peers such as Contemporary Amperex Technology (CATL) and LG Energy Solutions, and considerably above that of its pre-revenue startup battery peers. Deutsche Bank believes QS' stock performance from here will reflect perceived likelihood of success with its technology validation and ramp up, and therefore be heavily influenced by results of testing and ability to hit technical milestones. If QuantumScape successfully delivers on those, Deutsche Bank sees room for its valuation to reach the high-end of established li-ion battery peers due to its potentially superior technology, at 2x 2028 EV/sales which would suggest upside to $24. Conversely, if the company’s development plans start facing complications, delays or loss of momentum, Deutsche Bank sees large downside risk towards just 0.65x 2028 revenue, more in line with its startup battery peers, suggesting downside to $10. Deutsche Bank applies a 70%/30% likelihoods to these 2 scenarios to derive its $20 price target. | With an enterprise value above $6bn representing 1.4x EV/2028E revenue of $4.1bn, QS’ multiple is already almost in-line with the average of its well established li-ion battery peers such as Contemporary Amperex Technology (CATL) and LG Energy Solutions, and considerably above that of its pre-revenue startup battery peers. Deutsche Bank believes QS' stock performance from here will reflect perceived likelihood of success with its technology validation and ramp up, and therefore be heavily influenced by results of testing and ability to hit technical milestones. If QuantumScape successfully delivers on those, Deutsche Bank sees room for its valuation to reach the high-end of established li-ion battery peers due to its potentially superior technology, at 2x 2028 EV/sales which would suggest upside to $24. Conversely, if the company’s development plans start facing complications, delays or loss of momentum, Deutsche Bank sees large downside risk towards just 0.65x 2028 revenue, more in line with its startup battery peers, suggesting downside to $10. Deutsche Bank applies a 70%/30% likelihoods to these 2 scenarios to derive its $20 price target. | ||
== Opportunity to disrupt massive market == | === Opportunity to disrupt massive market === | ||
'''Inflection point for EV adoption across the automotive industry''' | '''Inflection point for EV adoption across the automotive industry''' | ||
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Given the company’s solid operational progress to date, Deutsche Bank sees about a 70% chance that the company successfully meets its stated targets for launch under scenario #1 and just 30% for scenario #2. Together, this leads to a blended EV of $6.6bn, justifying its price target of $20. Ultimately, Deutsche Bank thinks QuantumScape’s value could be determined by its testing/validation progress, manufacturability, and timing relative to some of its next-gen peers. If successful, the company could dethrone the traditional li-ion incumbents that have dominated the battery space for decades. Deutsche Bank therefore initiates coverage of QuantumScape with a Hold rating, as Deutsche Bank believes that the company offers a compelling product with a strong opportunity to disrupt the incumbent battery market if proven successful. Nevertheless, the company is faced with considerable operational challenges ahead as it works to progress through its prototype sample phases and eventually move to mass production on a relatively tight timeline. Its partnerships with VW and numerous other global/luxury automakers should guarantee solid volumes once deployed, so the key lever for the stock’s potential rests in the validation and ramping stages leading up to launch. Its $20 price target is based on a 70/30 blend of 2.0x 2028 EV/Sales and 0.65x EV/sales based on its perceived likelihood of the company’s | Given the company’s solid operational progress to date, Deutsche Bank sees about a 70% chance that the company successfully meets its stated targets for launch under scenario #1 and just 30% for scenario #2. Together, this leads to a blended EV of $6.6bn, justifying its price target of $20. Ultimately, Deutsche Bank thinks QuantumScape’s value could be determined by its testing/validation progress, manufacturability, and timing relative to some of its next-gen peers. If successful, the company could dethrone the traditional li-ion incumbents that have dominated the battery space for decades. Deutsche Bank therefore initiates coverage of QuantumScape with a Hold rating, as Deutsche Bank believes that the company offers a compelling product with a strong opportunity to disrupt the incumbent battery market if proven successful. Nevertheless, the company is faced with considerable operational challenges ahead as it works to progress through its prototype sample phases and eventually move to mass production on a relatively tight timeline. Its partnerships with VW and numerous other global/luxury automakers should guarantee solid volumes once deployed, so the key lever for the stock’s potential rests in the validation and ramping stages leading up to launch. Its $20 price target is based on a 70/30 blend of 2.0x 2028 EV/Sales and 0.65x EV/sales based on its perceived likelihood of the company’s | ||
timely commercial launch and scaling efforts. | timely commercial launch and scaling efforts. | ||