QuantumScape Shares Are Up. This Analyst Says It’s Time to Take Profits.

QuantumScape Lab

Courtesy QuantumScape

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Stock in electric vehicle battery technology pioneer


is up — a lot. But Quantum’s technology is still new and faces a lot of competition. That combination makes it a good time to take some profits, according to Morgan Stanley.

Monday evening, analyst Adam Jonas downgraded


(ticker: QS) to the equivalent of Hold from Buy. His price target dropped all the way to $40 from $70 a share.

The downgrade has shares dropping in early Tuesday trading. QuantumScape stock is off almost 9%. The

S&P 500


Dow Jones Industrial Average

are both up about 0.3%.

The issue for Jonas doesn’t appear to be just about the stock’s recent run. Coming into Tuesday trading, QuantumScape stock has gained about 68% over the past month. A positive reaction to the company’s quarterly update as well as the gain in other EV stocks such as

Rivian Automotive

(RIVN) has helped boost shares.

Rapid gains can be one reason to trim positions in volatile sectors, but Jonas has some other concerns. He says he worked with the firm’s global battery team and mapped the battery “value chain from the mine to the highway line.”

At the margin, he sees more competition and now believes it’s appropriate to temper some of his more bullish assumptions about QuantumScape’s prospects, even though Jonas still calls Quantum a technological leader in solid state batteries.

Solid state, in this instance, refers to batteries without liquid electrolytes — common in current technology — that facilitate the movement of electrical charge. Solid state batteries promise better safety, faster charging, lower cost and better EV range. They are a significant upgrade, but they haven’t been successfully manufactured for cars yet. QuantumScape is expecting significant sales around mid-decade. There is a long way to go.

Other companies, including battery startups SES and Solid Power as well as existing battery makers such as China’s

Contemporary Amperex Technology Co. Ltd

(300750.China)–better known as CATL, are working on next generation EV battery technology, too.

Even after the downgrade, Jonas still has the highest price target on the Street for QuantumScape stock. His old target was just way above his peers. Aside from Jonas, QuantumScape analyst price targets range from $24 to $36 a share.

With the downgrade, only one out of seven analysts rate the shares Buy, according to Bloomberg. The average Buy rating ratio for stocks in the S&P 500 is about 55%.

All the stock price targets, aside from Jonas’, are below where Quantum shares are trading early Tuesday. Analysts can have trouble keeping up when shares rise and fall rapidly.

Write to Al Root at allen.root@dowjones.com

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