QuantumScape attracts bull rating at Evercore ISI due to tech advantage

Evercore ISI started off coverage on QuantumScape (NYSE:QS) with an Outperform rating on its view the company may have a crucial tech advantage over competitors.

Analyst Chris McNally and team highlighted that QuantumScape's (QS) cells allow for significantly higher energy density that could be +50 to 100% greater than the conventional Li-ion batteries of today. Crucailly, QuantumScape's (QS) tech is noted to be agnostic to the cathode chemistry. McNally said that in the long run, increased energy density per cell allows for more range per weight or size and allows for greater engineering flexibility and reduced vehicle cost via lightweighting. He said the reduction in manufacturing cost comes from the removal of the graphite anode. Looking at the earnings potential, the manufacturing advantage can be taken either as increased gross margin to QS or eventually used as pricing/market share advantage if QS-licensed its solid-state tech to a large legacy battery maker.

"While QS will initially be priced as a premium product (due to higher performance characteristics), if the tech came downstream via a mass market battery player, it could lower the cost curve of the EV battery for the entire industry."

Evercore ISI set a price target of $10 on QuantumScape (QS) to represent 44% upside potential for shares. The short interest on QuantumScape (QS) stands at 16.0% of the total float. Shares of QS moved up 1.05% in premarket trading on Monday, but are still swapping hands below their 200-day moving average.