I’ve long argued that Quantumscape (NYSE:QS) stock remains the best choice equity investment in solid-state battery technology. That remains true.

Investors have to understand that the ride will be bumpy and most do. As with any stock, fundamentals are of paramount importance. That’s where we’ll start in understanding QuantumScape. 

Fundamentally Fine

One of the most important things to note regarding QuantumScape is that the firm isn’t expected to begin generating meaningful revenues for four years or five years . To many investors that makes it a no-go out of the gate. To them, the argument goes that QS stock is therefore unlikely to undergo any drastic upward price changes. I disagree with that notion. If you’d like to know why, skip to the next section below.  

Otherwise, read on as we discuss Quantumscape’s fundamental situation. 

QuantumScape is a pre-revenue company developing a game-changing technology. That means the company spends a lot of money on development while seeing none come through the door. 

The firm spends large amounts on research and development, as expected. For the three months ended March 31, the company spend $61.345 million. And it spends about half as much again on general and administrative expenses. $29.312 million was spend in the same period. That 2:1 R&D to G&A ratio held true on a year-over-year basis as the company increased spending two-fold. 

The company lost $90.35 million in the latest quarter. But investors should expect that trend to continue moving forward. And although QuantumScape’s 21-cent-per-share loss was worse than the 15 cent per share loss Wall Street was seeking, fear not. 

QuantumScape should have $800 million in liquidity entering 2023. So, as a growth stock, QS is fundamentally fine. 

Upwardly Mobile?

The argument goes that QS stock doesn’t have much potential to pop before it produces significant revenues which won’t happen for four years or five years. 

One argument to counter that notion is simple: The analysts covering it give it an average target stock price of $20.50. Target stock prices are calculated 12 months to 18 months into the future. That means that QS stock has 77% upside in the next year to year and a half based on current prices. 

So the idea that investors will have to wait for any significant upside for four or five years is somewhat absurd. The question then becomes what will propel QS stock higher in the mid-term?

Catalysts to Watch

My thesis is that QuantumScape’s shares clearly have plenty of ability to pop based on target prices alone. Investors don’t have to purchase now and wait four years to five years — betting on commercialization — to win with QS. 

Rather, they simply need to pay attention to QuantumScape’s progress in scaling up its battery technology layer by layer. The firm has successively proven that it can maintain performance as it has scaled up from single-layer cells to 4 layer, then 10 layer, and most recently, 16-layer cells. 

Investors simply need to pay keen attention to the company’s progress in scaling up its batteries. The truth is QS stock will pop when it makes progress toward full commercialization, not only once it is finally commercially successful. 

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.