Why QuantumScape Stock Zoomed Up 55% in September and Just Hit a 52-Week High

QuantumScape's (NYSE: QS) batteries could finally be making the leap from laboratories to commercial markets. At least that's the impression investors got last month when its anchor customer gave a live demonstration of its solid-state lithium metal battery cells in a motorcycle for the first time ever. To top that, QuantumScape struck a meaningful new partnership on the last day of September.

The two factors have sent QuantumScape stock soaring in recent weeks: It logged a 55.4% gain in September, according to data provided by S&P Global Market Intelligence, and is already up another 29% so far in October as of this writing.

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A huge milestone and a partnership for QuantumScape

QuantumScape's solid-state battery technology is expected to be an improvement over the conventional lithium-ion batteries that currently power electric cars. It uses solid ceramic separators in its battery cells instead of polymers, which allows it to use pure lithium-metal anodes instead of carbon or silicon anodes. That significantly increases the energy density of the resulting batteries, and therefore the driving range of electric vehicles (EVs) powered by them. They also offer the potential of greater safety, faster charging, and a longer lifespan.

QuantumScape, however, has yet to commercialize its technology, and even as it nears that point, one of its biggest challenges has been to produce defect-free ceramic separators cost effectively and at scale.

In September, QuantumScape addressed both of those concerns to a great extent.

At the IAA Mobility show in September, Volkswagen Group's (OTC: VWAGY) subsidiary PowerCo displayed the first all-electric Ducati V21L race motorcycle -- and it was equipped with QuantumScape's QSE-5 solid-state batteries.

QuantumScape stock surged on news of the first-ever demo of its battery technology in the real world. PowerCo CEO Frank Blome called the demonstration "just the beginning" and said the two companies are trying to bring "game-changing solid-state battery technology to the world as soon as possible."

QuantumScape's partnership with Volkswagen goes back to 2012. Since then, the global automotive giant has invested millions in the company and formed a joint venture with it. PowerCo also recently expanded its licensing agreement to invest another $131 million into QuantumScape -- over and above the previously agreed $130 million -- as it expands QSE-5 battery production.

Days later, QuantumScape announced an agreement with glass and ceramics giant Corning (NYSE: GLW) to jointly develop ceramic separators that can be produced at scale for commercial use.

How high can QuantumScape stock go?

Here's what the two developments from September mean for QuantumScape: Its strategic partner and customer is going all-in to commercialize its solid-state battery technology, and the battery maker has also found a huge partner to manufacture the most critical components of its batteries as it commences production.

QuantumScape stock hit a 52-week high of $16.49 per share on Oct. 3. For a change, this recent rally isn't being driven by speculation. And QuantumScape stock could continue to rally as the company inches closer to its first sale.

However, the company already commands a market cap of $9 billion with zero sales. Eventually, its value will all boil down to how much revenue it can generate and when it can start converting that revenue into cash flow and profits. As management noted during QuantumScape's most recent earnings release: "The challenges of scaling production remain significant, and there is still much work left to do." Bear that in mind if you buy the stock. If the potential rewards seem high, so are the risks for now.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool recommends Corning and Volkswagen Ag. The Motley Fool has a disclosure policy.