QuantumScape (NYSE:QS), a development-stage company that focuses on solid-state lithium-metal batteries for electric vehicles (EVs), will announce its first-quarter 2022 earnings on April 26. But it’s hard to believe QS stock is a buy now, mainly because the company does not generate any revenue yet.
Its ultimate goals are to build the best EV battery and transform energy storage by giving EVs a longer range, faster charging and enhanced safety. This is very promising with a lot of business potential, but let’s not forget that QuantumScape is not a startup.
QuantumScape was founded in 2010 and is a public company developing its innovative battery cell technology. The financials and fundamentals matter a lot right now, and these are neither good nor inspiring.
As the firm has zero revenue, it is losing money. In 2021, it reported a net loss of nearly $46 million, which was much lower than its net loss of $1.68 billion in 2020.
A big part of this was attributable to changes in fair value of Series F convertible preferred stock tranche liabilities for 2020. It was also linked to a change in fair value of assumed common stock warrant liabilities for 2021. But these are not the operating results that matter the most here.
The company reported a 2021 loss from operations of $215.3 million, much higher than its loss from operations of $81 million in 2020. Its research and development expenses plus general and administrative expenses have been increasing over the past two years.
These expenses are expected to increase further as QuantumScape gets closer to commercializing its battery technology. Widening net losses are very likely, which is not supportive of QS stock now.
QuantumScape is also burning cash at an increasing pace. Shareholders have been diluted in the past year, with total shares outstanding growing by 13.1%.
From a fundamental standpoint, QS stock is not a buy now. Investors should wait for the latest financial results and business updates, which are very important to the goals of the company. Without revenue generation, odds are any upside will be short-lived.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.