Tumbling to a price of $4.33 during today's afternoon trading session, shares of QuantumScape are now -9.45% below their average target price of $4.79. Does this mean the stock will reverse course? Analysts are giving QS an average rating of hold and target prices ranging from 2.5 to 8.0 dollars per share.
To understand the market's outlook on the stock, we can look at QuantumScape's short interest: the proportion of the share float that is tied to short positions. Behind each short position is an investor who believes that the stock will decline in the future. Here, the stock's short interest is 14.9% which means the outlook is split.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
We can make inferences about the market sentiment surrounding QuantumScape by analyzing its rate of institutional ownership. If institutions such as hedge funds and pension funds are the primary shareholders of a corporation, it most likely means that its shares are a good investment according to those institutions' analysts.
At 32.8%, the rate of institutional ownership is average, indicating that a sufficient number of institutions have concluded that it is a stable investment. Beware, however, that the rate of institutional ownership could also indicate an ongoing proxy battle or takeover attempt -- so you should also periodically check the news about a stock whose institutional ownership you are tracking.
To sum up, QuantumScape is probably the subject of mixed market sentiment because of an analyst consensus of some upside potential, a hold rating, an above average percentage of its shares sold short, and only a small number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about QS:
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The stock has trailing 12 month earnings per share (EPS) of $-0.91
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QuantumScape has a trailing 12 month Price to Earnings (P/E) ratio of -4.8 compared to the S&P 500 average of 29.3
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The company has a Price to Book (P/B) ratio of 2.18 in contrast to the S&P 500's average ratio of 4.74
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QuantumScape is a Consumer Cyclical company, and the sector average P/E and P/B ratios are 20.93 and 2.93 respectively
