On Tuesday, QuantumScape Corp (BMV:QS) shares plunged more than 9% after Morgan Stanley analysts downgraded the stock to equal weight from overweight. Analyst Adam Jonas cited competition risk as a major catalyst for the downgrade adding that the battery market could be headed for significant ‘Balkanisation’.
In a note to investors, Jonas wrote:
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Our Battery Blue Paper points us to the threat of competition, technological risk and ‘Balkanization’ of the global battery market. While we continue to see QS as a technological leader in solid-state, we modestly haircut our ramp to scale.
QuantumScape shares are still up more than 48% over the last month despite Tuesday’s sharp decline. However, the stock is down more than 26% this year.
The analyst assigned a price target of $40.00 per share on QS stock, implying an upside potential of about 9.56% based on the market price as of this writing of $36.51.
Is it too late to bet on QS stock?
From an investment perspective, QuantumScape shares trade at a steep price-book ratio of 10.25, making the stock less attractive to value investors.
On the other hand, analysts expect its earnings per share to grow by 89% this year before rising by a further 4.20% next year.
Therefore, growth investors could find it as an attractive option for their portfolios. However, given the 48% rally over the last 30 days, this year’s prospective growth could be baked in the current stock price.
Therefore, it may be too late to buy the stock now.
Technically, QuantumScape shares seem to be trading within an ascending channel formation in the intraday chart. As a result, the stock has rallied to the overbought conditions of the 14-day RSI.
Therefore, although the current pullback has pushed the price closer to the normal trading range, the downward movement seems poised to continue for the foreseeable future.
Investors could target extended declines at about $31.52, or lower at $26.21, while 442.65 and 448.11 are crucial resistance zones.
It may not be too late to swoop for profits
In summary, although QuantumScape shares seem to have recently plummeted by more than 9%, the stock is still up more than 48% over the last 30 days.
Therefore, with shares far from reaching oversold conditions, it may be time for profit takers to swoop in.
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