QS: Global Valuation

Overview

I’ve previously presented the universe of potential outcomes for Quantumscape QS 0.00%↑ as a company, and each case’s potential valuation.

1. Bear Case - Share price range: $0 - $13 (median: $6.50)

   The overarching premise here is that Quantumscape IP, even in a ‘total failure’ scenario, should carry some residual value.

2. Base Case - Share price range: $3 - $18 (median: $10)

   This is the scenario where Quantumscape does succeed in reaching commercialization, but enters a saturated market where others also successfully deliver high performance products…resulting in low market share and low pricing power.

3. Bull Case - Share price range: $44 - $144 (median: $94)

   This is the scenario that investors most hope for, where Quantumscape does succeed AND no other company does, resulting in deep market penetration and strong pricing power. This would be the ‘Nvidia’ style outcome.

Figure 1: Scenario Pricing

Expected Value

The risk-adjusted valuation should incorporate the likelihood of each of these scenarios playing out. Figure 2 shows the probability tree for Quantumscape using the assumptions from the valuation posts linked above.

I wrote an expected value ‘primer’ in anticipation of this post.

Figure 2: QS Probability Tree

Distilling Figure 2, we get this following: