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Shares of QuantumScape (NYSE:QS) stock are down 7% today after investment bank Goldman Sachs downgraded the battery maker’s stock to “sell” from “neutral.”
The downgrade from Goldman Sachs ends what has been a very bad year for Quantumscape shareholders. The San Jose, California-based company, which manufactures solid-state lithium metal batteries for electric vehicles (EVs), has seen its share price drop 70% this year, and that was before today’s move lower.
In a note to clients, Goldman Sachs downgrade QS stock to sell and lowered its price target on the shares to $5 from $8 previously. Analysts at Goldman said the company’s long time to market is likely to lead to negative earnings per share ( ) for several years moving forward. Quantumscape’s stock finished trading yesterday (Dec. 13) at $7.09 per share.
“In light of the tough macro conditions, we believe that QuantumScape shares will underperform our broader coverage,” wrote Goldman Sachs analyst Mark Delaney in the note. “Additionally, we believe the broader battery industry is highly competitive.”
Goldman Sachs added in its downgrade that it would be more positive on the stock if QuantumScape can demonstrate a clearer path to profitability.
Why It Matters
The downgrade of QS stock by Goldman Sachs has further shaken investor confidence in the company and its outlook. This is leading to the heavy selling of Quantumscape’s stock today. It is worth noting that Quantumscape, which has about 400 employees, counts some big-name investors, including Microsoft (NASDAQ:MSFT) co-founder Bill Gates and German automotive giant Volkswagen (OTCMKTS:VWAPY).
However, there are those in the electric vehicle industry who question Quantumscape’s focus on solid-state lithium metal batteries, claiming that the technology, which holds the potential to increase battery life and cut charging times dramatically, is years away from being commercially available. Some critics doubt the technology will ever be widely deployed.
This uncertainty, and a lack of profits, have led to a steep downturn in QS stock. In its most recent earnings report, Quantumscape announced a loss of 21 cents per share from no sales. Wall Street analysts had expected a loss of 15 cents a share.
What’s Next for QS Stock
QS stock takes a thumping today on news of the downgrade by Goldman Sachs. This is the latest in a string of disappointments for the battery company. Given the uncertain outlook and continued decline in Quantumscape’s share price, investors may want to steer clear of this stock for the time being.
On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.