HSBC downgrades QuantumScape flagging visibility on contract economics

Investing.com -- HSBC downgraded QuantumScape to Reduce, saying the stock’s sharp rally has moved far ahead of the limited disclosure around its commercial agreements and uncertainty over how its technology will be monetized.

QuantumScape has delivered several milestones this year, including launching production of its Cobra separator, expanding its agreement with PowerCo to up to 85 GWh a year, securing a $131 million upfront payment, and beginning shipments of its QSE 5 B1 samples.

It also signed development deals with Murata and Corning. HSBC said these achievements strengthen confidence in the company’s progress.

But the analysts said the stock’s 145% jump this year reflects expectations that go well beyond what can be supported by available information.

HSBC said its own forecasts assume 180 GWh of licensed volumes and a 15% royalty rate, but the stock’s value implies the market is betting on as much as 10 to 30% higher volumes and royalty rates of 12.5 to 20% by 2035, which it said is not realistic given current visibility.

HSBC said QuantumScape’s limited disclosure on licensing structures, revenue sharing and deal economics makes it difficult to judge how profitable its partnerships could be.

It also cited uncertainty around how competitive production costs will be at scale and when the company’s batteries will appear in vehicles on the road.

The bank raised its price target to $10.50 from $5.30 to reflect faster ramp expectations and new collaboration revenue, but said the risk reward has turned less favorable after the rally, leading to the downgrade.

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