The EV bubble continues to stall out, with today’s latest victim – QuantumScape, one of my favorite companies out there (theoretically). This is no surprise, considering we have been writing on the subject a lot. Check out our piece on Tesla/Nio and Plug Power for reference. In those articles, we speculated that the EV bubble will slow down significantly. Or, unfortunately, be over…And today is another example, as QuantumScape takes a 13% dip. So what happened and what is to come? Check out our QuantumScape Stock Forecast and analysis below!
What Happened Today?
Are you holding QuantumScape in your long term account?
Then you may have felt the pain of the 13% plunge. I’m sure it stings, but that is nothing new. QuantumScape has been getting destroyed regularly since the 1300% pump a few months ago.
So…what happened today?
According to Business Insider:
The offering could sell a total of 14.95 million shares if underwriters exercise a 30-day option to buy an additional 1.95 million shares. At current prices of about $60, the offering could raise up to $900 million in proceeds for the firm. The offering has not yet been priced.
Proceeds from the offerings will also cover its full share of equity contributions to its joint venture with Volkswagen for the previously announced 20GWh expansion of its QS-1 joint manufacturing facility. QuantumScape has partnered with Volkswagen to provide next generation, more efficient batteries for use in the production of electric vehicles.
Great…another company dumping shares on existing investors. This follows a long string of companies dumping new shares on the market of late.
It is no wonder the market has been dumping on every rip lately.
And, generally speaking, when corporations are coming out with new shares en masse, it is not a good sign for the broad markets.
Although, it is convenient for them, dumping shares at these elevated valuations.
In any case, let’s see the technical damage this move has done to QuantumScape Stock.
To make a prediction on future stock movements, it is important to analyze the chart.
See the 5 minute and daily QuantumScape charts below:
As you can see above, QuantumScape got hammered today. It’s a shame, especially after finally breaking above all the moving averages yesterday.
There was very little dip buying and the stock continued to move lower pretty much the entire day.
Not a great sign, but not the end of the world.
Let’s zoom out and see what the daily chart says:
From what can be seen on the daily chart, the stock continues to hold the uptrend, hovering in the $50 range. A lot of damage was sustained after that 1300% move earlier in the year, as the stock continues to consolidate.
Undoubtedly, this strength following a parabolic move up continues to be fueled by institutional investors and positive news coverage. And we think it will continue.
Of course there will be many ups and downs, but if what the company claims (next generation battery technology), these little dips will seem like nothing in the long run.
So what lies ahead for QuantumScape stock?
QuantumScape Stock Forecast
If you have not guessed already, QS is one of our favorite stocks of all time. For one of two reasons:
- We caught the majority of the parabolic move earlier in the year. (Check out this article from November if you don’t believe me).
- The Technology!
#1 needs no explanation. Adding several thousand dollars to an account from one play is an incredible feeling.
#2: The technology this company claims to have is incredible. This is what initially caught our eye. And, since the last year was the Year of the EV, as we call it, it is no wonder the stock did so well.
If what they say is true, it will mean the company has the best battery technology known to date.
Check out the basics of their claims below:
Low cost, high density, fast charging batteries…very bullish! (assuming it is true). Since our hypothesis is that electric cars will be the standard in the next several years, they will need next generation battery technology to compete. This extra share offering will theoretically provide the company will extra cash to continue improving the technology, and eventually bring it to mass production.
After all, the space is starting to get very crowded. And car manufacturers are notorious for low margins. They are going to need all the help they can get.
As a result, we remain pretty bullish on the stock and believe it will reach $85/share by end of 2021 or sooner.
Although today’s dump was a setback on the daily chart, the price continues to hover in this range. Dip buying below, and hovering above a certain price ($50), is generally bullish.
Finally, our $85 price target is based on the gap above. The gap is around $84, and we believe it will fill, as they almost always do. Even if it takes longer than one would expect.
This is all assuming the company does not pull a Nikola and get brought up on fraud charges, which is always a possibility!
Always do you due diligence and control your risk!
What do you think? Minor setback or end of the road for QuantumScape?
Tell us in the comments below!
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