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QuantumScape Stock Remains as Compelling as Ever, Meaning a 50/50 Chance

There are many reasons to believe the share price of QuantumScape (NYSE:QS) stock should rise. After all, the company is developing solid-state lithium…

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There are many reasons to believe the share price of QuantumScape (NYSE:QS) stock should rise. After all, the company is developing solid-state lithium EV batteries for future commercialization. Yet, QS stock is down almost 73% year-to-date. What’s with the disconnect?

Source: Michael Vi / Shutterstock.com

Such batteries promise a quantum leap over current dominant lithium-ion battery technology. The chief difference between the two is that lithium-ion batteries rely on a liquid electrolyte. Solid-state lithium EV batteries on the other hand, rely on a solid electrolyte.

Solid-state batteries simply have many characteristics which make them superior. These include higher energy density, lighter weight, greater range and shorter charging times.

Sounds great, but they aren’t the panacea the EV industry needs. Well, to be more precise they aren’t commercially available. If QuantumScape reaches commercialization first, QS shares should multiply in value many fold. But that’s simply something no one can yet predict.

This is evident in multiple metrics used to understand QS stock at present.

Up and Down

QuantumScape was one of the biggest electric-vehicle stories of last year and this year. With the stock coming out of a special-purpose acquisition company (SPAC) merger with Kensington Capital Acquisition Corp., it went from under $20 per share in November to reach $130 just before 2021 arrived. Many investors believed that a true revolution in EV battery technology had arrived.

But as quickly as it rose, it again fell. Those pesky laws of gravity brought it to $40 just as quickly as it exploded upward weeks prior. The markets were overhyped, with the company’s leader being blamed by some for his grandiosity.

Share prices recovered a few times, but QS stock fell and stayed below $30 in May.

The truth is QuantumScape has a long road before it finds success. As more and more potential investors come to that realization, QS stock will continue to trade sideways.

Sideways Stagnation

One of the most obvious reasons QuantumScape will likely continue to trade sideways for the foreseeable future relates to revenues: That is, there are any anticipated until 2024.

That makes it incredibly difficult for any reasonable investor to charge ahead and plow their capital into QS stock. The idea that QuantumScape likely won’t have revenues for years to come also highlights a slight contradiction.

The contradiction is this: Four of the six analysts covering QuantumScape consider it a hold but their consensus price is $36.33. It would seem that more would rate it a “buy” given its current $24 share price. But what would justify that given again that it doesn’t anticipate revenues until 2024?

The truth is that the company is in no immediate danger. There isn’t much to worry about, but neither is there much which makes QS stock compelling currently either.

The company’s most recent financial report shows as much.

Slow Burn, Slow Return

QuantumScape anticipates entering 2022 with $1.3 billion in liquidity. It ended Q2 with $1.5 billion of liquid assets. At that rate it faces no immediate problems and should be fine for a long time to come.

But again the issue is that revenues aren’t expected to come for a long time. As that report noted: “Our longer-term targets remain unchanged — we aim to deliver prototype samples in commercially relevant form factors to automotive OEMs from our engineering lines in 2022, provide cells for R&D test cars from QS-0 in 2023 and enter commercial production in 2024-2025.”

If QuantumScape were the only viable solution to the solid-state EV battery market it would be a must buy . But there are of course multiple competitors.

Expect Tesla (NASDAQ:TSLA) to make some sort of noise at some point. It already posted updates earlier this summer. More are certain to come.

Toyota (NYSE:TM) is working to develop similar technology, and so are a roster of other vehicle manufacturers through various investments.

QuantumScape just happens to be one of many. It’ll trade sideways until it shows progress which sets it apart otherwise. That’s why there’s little reason to invest right now.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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Author: Alex Sirois

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Energy & Critical Metals

Invest in a Greener Planet With the ProShares Cleantech ETF

An ideal way for investors to get exposure to the industry leaders in green technology is through the ProShares Cleantech ETF (NYSEARCA:CTEX). According…

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An ideal way for investors to get exposure to the industry leaders in green technology is through the ProShares Cleantech ETF (NYSEARCA:CTEX). According to data from ProShares, the fund “invests in companies involved in developing and building the green technologies that could power the future in areas like hydro, solar, wind, and geothermal.” So CTEX stock is a good investment for those who want exposure to many types of green energy.

Source: Fit Ztudio / Shutterstock

Profits from clean technology, according to Goldman Sachs (NYSE:GS), could yield $1 trillion-2 trillion of funds for green infrastructure investments every year. Clean technology may also create between 15 and 20 million jobs globally.

In 2021, the business of climate change is beginning to catch up to the emotions in the climate change debate. And that makes it a good time to invest in the clean energy sector.  Clean energy includes solar and wind stocks. But it also includes related sectors like electric-vehicle charging and other renewable energy sources, such as renewable natural gas (RNG).

Skating to Where the Puck Is Going

An often overused and misused cliché is “skating to where the puck is moving.” However, in this case, I think it’s an apt expression. For at least the past 20 years, the world has been racing to develop clean-energy solutions. But that didn’t quench the need for fossil fuels.

Even the most fervent climate change advocates knew that transitioning away from fossil fuels was never going to be like flipping a light switch.  At times, companies had to move forward while still waiting for the technology that they needed to be developed. It has been a slow transition.

In the last decade, world governments have been forcing the issue. For example, according to a BloombergNEF forecast, worldwide emissions must decline by 30% from 2019 to 2030 to meet the Paris Climate Accord Agreement’s goal of net-zero energy emissions by 2050.

Switching to electric vehicles alone won’t enable the world to meet that target. And that’s why the rush is on to develop renewable energy sources such as solar, wind and hydrogen.

CTEX Stock Takes an All-of-the-Above Approach

Wind and solar have dominated the shift towards clean energy. But as the recent surge of natural gas prices proves, things can change quickly in the energy  sector. The Cleantech ETF is ideal for investors who do not want to have to pick the best-in-class company from each sector.

ProShares Cleantech ETF follows the S&P Kensho Cleantech Index. According to the fund’s prospectus, companies in that index “must produce products or services related to clean energy technology, as identified by the index provider’s automated scan of recent company-issued filings.”

Within each category, the securities are given equal weight. However stocks defined as core securities are overrepresented relative to those designated as non-core securities.

U.S. companies make up over 75% of the fund. But CTEX stock also includes non-U.S. companies that are based in both developed and emerging markets. The fund is reconstituted annually and rebalanced semiannually.

Currently, the fund owns the shares of 29 companies.  Not all types of clean energy are always represented. As I was writing this article , the fund was heavily weighted towards some of the largest names in the solar sector. And Tesla (NASDAQ:TSLA) is also one of the fund’s top-ten holdings.

CTEX has an annual expense ratio of 0.58% or $58 per $10,000 invested.

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.

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Author: Chris Markoch

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Energy & Critical Metals

IRENA: Energy Transition to Create 25 Million Green Jobs by 2030

IRENA has said that the global economy will create more green jobs than lost during the pandemic by accelerating investments in renewable energy to meet…

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The International Renewable Energy Agency (IRENA) predicts that some 25 million new green jobs will be created by 2030, surpassing the 7 million lost due to the pandemic.

However, governments will need to accelerate investments in renewable energy in line with sustainability targets set under the Paris Agreements.

In its new Renewable Energy and Jobs Annual review 2021, complied in partnership with the International Labour Organisation, IRENA predicts that some 5 million workers who lost their positions as a result of the pandemic will find new jobs in the same occupation in another industry.

Following the 1.5ºC pathway will result in the creation of some 38 million new positions within the renewables sector and 43 million by 2050, according to IRENA. Of these, the solar segment will account for a lion’s share with 19.9 million, followed by the bio-energy sector which is anticipated to create 13.7 million new positions.

IRENA found that despite the negative impacts of the pandemic in 2020, the number of jobs within the renewable energy sector increased to 12 million in 2020 up from 11.5 million in 2019. China and the solar industry accounted for a majority share of the new jobs created in 2020.

China accounted for 39% of the total jobs in the renewables sector in 2020 whilst the solar segment reached 2 million jobs. The hydropower sector stood at number three with 3 million positions and the wind sector at number four with 1,254 jobs.

However, during the launch of the report, Francesco La Camera, director-general of IRENA, highlighted the need for governments to introduce policies that encourage renewable energy investments in a just and inclusive manner. He emphasized the need for the inclusion of women and underrepresented communities in decision making and job creation and placement.

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La Camera, said in 2020 “women accounted for one-third of all jobs, better than the conventional sector but not enough. The energy transition needs to be an achievable one, just and inclusive.”

“For it to be successful, the energy transition needs to tap a diverse of talent and gender.”

La Camera urged governments and energy stakeholders to invest more in educating women with STEM skills and ensure their job training and placement is a key focus.

He reiterated: “Renewable energy’s ability to create jobs and meet climate goals is beyond doubt. With COP26 in front of us, governments must raise their ambition to reach net zero. The only path forward is to increase investments in a just and inclusive transition, reaping the full socioeconomic benefits along the way.”

Martha E. Newton, deputy director-general of policy at the International Labour Organisation, added: Going beyond the number of jobs is critical to achieve the social-economic benefits of renewables, freedom, equity and security.

“A wide range of policies are required to ensure social protection, workers rights, inclusion to support female participation in the energy transition”

Other key findings of the study include:

  • COVID-19 caused delays and supply chain disruptions and impacted jobs differently in various countries and end-use.
  • Liquid biofuels employment decreased as demand for transport fuels fell.
  • Off-grid solar lighting sales suffered, but companies were able to limit job losses.
  • Women suffered more from the pandemic because they tend to work in sectors more vulnerable to economic shocks.

Read the full report here.

The post Energy transition to create 25 million green jobs by 2030 – IRENA appeared first on Power Engineering International.

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Base Metals

For Lucid Motors To Win Mass Market, It All Comes Down to the Batteries

The electric car race seems very complicated. It’s not. For Lucid Motors (NASDAQ:LCID) and its competitors, it’s all about the batteries.
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The electric car race seems very complicated. It’s not. For Lucid Motors (NASDAQ:LCID) and its competitors, it’s all about the batteries.

Source: Around the World Photos / Shutterstock.com

Lucid CEO Peter Rawlinson, a former Tesla (NASDAQ:TSLA) executive, knows a lot about batteries. Thanks to his Saudi investors, he’s about to win a contract for the largest battery storage system in the world.

The question is whether he can make them. Lithium is already in short supply. Prices for lithium carbonate, a key ingredient in modern batteries, are at record highs.

Designing great batteries, and having the supplies with which to make them, is the key to winning the mass market. Batteries are key to eliminating “some of the biggest barriers to entry for consumers: range, recharging times, charging infrastructure, cost,” National Geographic’s Craig Welch reported. Lucid claims its EVs will exceed a range of 500 miles per charge.

The Scaling Problem

Now that Lucid is starting to make its luxury Lucid Air sedan, and getting great reviews, it must scale that production.

This won’t be easy. Elon Musk wears the scars of scaling. I warned about this back in 2018. Musk heeded the warnings, solved the problems, and rode Tesla to glory.

In theory, electric cars are very simple. Electric motors have one moving part, which is attached to the driveshaft. Gas-powered cars have hundreds of parts. Most of an electric’s moving parts can be hidden in the wheel wells.

In practice, scaling is not so simple. You don’t get anywhere without scaled production of batteries. Musk realized this. His battery “Gigafactory” in Nevada is the key to his whole operation.

It’s the Batteries, Stupid

Lucid is depending on LG Chem for its batteries. If the Korean company can deliver, Lucid can meet its ambitious 2023 production target of nearly 1,000 cars per week.

But that’s not going to be easy. LG Chem is already supplying other car makers. General Motors (NYSE:GM) blames LG Chem for a $1 billion recall of its Chevy Bolt. Shares of LG Chem lost a quarter of their value in August after problems were found at two of its Asian plants. The shares have since recovered just half the losses.

Those with gray in their hair remember the Democrats’ 1992 slogan, “It’s the economy, stupid.” With electric cars, it’s the batteries, stupid. Rawlinson is glossing over what could be a major problem.

The GM problem was fixed in September. But a shortage of batteries could be a bigger problem for car makers than the chip shortage.

Meanwhile, Lucid Air stock is up 21% since the start of September, mainly on the strength of its reviews. None of the five catalysts our Samuel O’Brient found recently for the stock’s rise involve proof of battery production and supply.

Yet battery production bottlenecks are now seen as the key roadblock to electric vehicle production. It’s not the assembly lines, not the design, not the orders. It’s whether there are going to be enough batteries to supply this demand. My InvestorPlace colleague Tezcan Gecgil has a piece today that offers an investment strategy on QuantumScape (NASDAQ:QS), which is working on developing energy-dense solid-state batteries with high driving range and fast charging times.

Pay attention to recent moves by Tesla to use iron-based batteries for its models. Lithium-iron-phosphate (LFP) batteries use an older, cheaper battery chemistry and are popular in China. TechCrunch reported on Oct. 21. “One major reason why LFP batteries are not seen much outside of China relates to a series of key LFP patents, which have allowed the country to dominate the LFP market,” wrote Aria Alamalhodaei, “But those patents will soon be expiring, and it seems that Tesla has its eye on that timeframe.” That could enable Musk’s battery manufacturing to be done nearer to its car assembly lines.

The Bottom Line

There’s a certain “yadda yadda” in the positive chatter about Lucid Motors. They’re skipping over the key point.

The key point is the battery. Lucid is lined up alongside every other car maker in seeking batteries to power its assembly lines. Many are going with the same supplier, LG Chem, which has had difficulties, and whose stock is down as a result.

If you believe in Lucid, look toward the December spin-off of its battery supplier as LG Energy Solutions. Or dial up your broker and buy Sigma Lithium (NASDAQ:SGML). That’s a Canadian lithium supplier whose stock has quadrupled this year. Sigma claims it can supply LG Energy’s needs for at least six years from a plant in Brazil.

If Sigma can execute on that contract, Lucid should be fine. Just remember. Battery supplies are the gating factor to its growth.

On the date of publication, Dana Blankenhorn held no positions in companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future available at the Amazon Kindle store. Write him at [email protected] or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.

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