QuantumScape Corporation

QuantumScape Corporation (NYSE: QS) is the leading maker of next-generation lithium-metal batteries for use in electric vehicles (EVs).

Investment Highlights - QuantumScape Corporation – Avoid at USD 53.14

• The Company does not have sufficient financial information available.
• The Company was sued for violation of Federal Securities laws as the Company was accused of providing wrong information regarding its solid-state battery technology’s success.
• The stock is highly volatile, and it has dropped by 37% since the start of 2021.
• From a technical standpoint, the Company is trading lower than the 20-day simple moving average of USD 79.1, which indicates further downside potential of the stock.

Key Risks

• The Company is exposed to risk regarding financial, political and legal conditions.
• The Company has a risk of delivering results as anticipated after its merger.
• The risk of lockdowns and restrictions may persist for an uncertain duration of time impacting the earnings of the Company.

Recent Developments

On 08 December 2020, the Company had released performance data for its solid-state battery technology and addressed several issues including charge time, operating temperature and cycle life.

On 03 December 2020, the Company updated that it would be showing the first glimpse of its solid-state electric vehicle battery technology at “Solid-State Battery Showcase” on 08 December 2020.

On 27 November 2020, the Company announced that it had completed its business combination with Kensington Capital Acquisition Corp. The shares will trade on NYSE under the ticker “QS” effective from the same day.

Share Price Chart (from 17 August 2020 to 11 January 2021)

 (Source: Refinitiv, chart created by Kalkine Group)

The Company was trading under ticker “KCAC” before 27 November 2020.

Conclusion

The Company had not reported any revenue for FY20 yet. The Company had completed the merger with Kensington Capital Acquisition Corp in November 2020 and now operating as a combined entity. The Company had released performance data of its solid-state battery technology addressing certain issues including density, cycle life and the operating temperature on 08 December 2020. It had driven the share price since then, but the stock witnessed a slump on 04 January 2021 over the news which had highlighted several risks associated with solid-state batteries that make them unacceptable for real-world field electric vehicles. On the technical front, the Company is trading lower than its 20-day simple moving average of USD 79.1, which indicates a downside potential in the stock price. The stock made a 52-week high and low of USD 132.73 and USD 9.74, respectively.

Based on the various risk factors discussed above, we have given an "Avoid" stance on QuantumScape Corporation at the closing market price of USD 53.14 (as on 11 January 2021), while we will revisit our stance when its solid-state battery technology become acceptable in the market.

Romeo Power Inc

Romeo Power Inc (NYSE: RMO) is the energy technology company providing large scale electrification solutions for commercial applications.

Investment Highlights - Romeo Power Inc – Avoid at USD 19.35

• The Company does not have sufficient historical financial data as the Company recently got listed on NYSE.
• From the valuation perspective, the Company has a greater Price/Book multiple than the median of the corresponding multiple of the Automobile & Auto parts industry.
• From a technical standpoint, the Company is trading lower than the 20-day simple moving average of USD 23.05, which indicates further downside potential of the stock.

Key Risks

• The Covid-19 pandemic may result in reduced activity levels and postponement of projects.
• The Company is exposed to cybersecurity risk regarding data breaching.

Recent Developments

On 04 January 2021, the Company announced that it had launched a program to select fleet electrification partners to execute on HES’s fleet electrification strategy.

On 29 December 2020, the Company announced that it had completed its business combination with RMG Acquisition Corp. The share of the Company will trade on NYSE under ticker “RMO” effective from 30 December 2020.

On 17 November 2020, the Company updated that it had received USD 234 million contract with Lion Electric in North American electric commercial transportation.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

The Company was trading under ticker “RMG” before 30 December 2020.

Conclusion

Romeo Power had contracted revenues of around USD 545 million. The recent contract with Lion Electric is expected to generate USD 234 million in revenue for the Company over a five-year period starting next year. The contract encapsulates Lion Electric’s fleet of all-electric class 6-8 commercial urban trucks and all-electric buses. On the technical front, the Company is trading lower than the 20-day simple moving average of USD 23.05, which indicates a downside potential in the stock price. The stock made a 52-week high and low of USD 38.90 and USD 9.50, respectively.

Based on the above rationale, we have given an "Avoid" stance on Romeo Power Inc at the closing market price of USD 19.35 (as on 11 January 2021).

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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