During May, and for part of June, there was little in the way of direct news regarding electric battery (or EV) technology company QuantumScape (NYSE:QS). However, after weeks of static, there once again has been some widely-publicized chatter about QS stock.

Unfortunately, the news itself wasn’t exactly the kind of thing that bolsters confidence from the investing public.

Instead, this news bodes better for the skeptics of this stock, especially those on the crowded short side of the trade, as it gives greater credence to their view that QS is a long-term dud.

That said, while this recent talk further calls into question the QuantumScape bull case,  it is not this talk, but something else, that could lead to a big pullback for the stock just around the corner.

Let’s take a closer look, and see why shares remain a no-go situation for short-term traders and long-term investors alike.

QS Stock: The Sell-Side is Becoming More Bearish

So, what is the latest chatter with QuantumScape, and why is it a negative for shares? As Seeking Alpha reported on June 9, another sell-side analyst has gone from “on the fence” to bearish on the stock.

That is, Wolfe Research’s Shreyas Patil has changed his rating on QS stock, from the equivalent to “hold” to the equivalent to “sell.” The justification for this downgrade has mainly to do with high uncertainty with QuantumScape, and its timeline to commercialization.

Until this uncertainty begins to clear up, investors will remain reluctant to give the stock a higher valuation. I more-or-less concur with Patil’s bearish argument.

However, besides the high uncertainty regarding QS’s upside potential, I also believe that the stock has very high downside risk. Even at today’s prices, a far cry from its “EV bubble” highs, QuantumScape shares remain overvalued.

Mostly, because the prospect of even partial success commercializing the company’s solid-state EV technology is priced-in as a near-certainty.

Murky commercialization progress, plus the fact QuantumScape is well-behind rivals in both the U.S. and China, call this into question. Again though, while this points to underperformance for shares in the long-term, something else could sink them in the short-term.

The Next Big Pullback

In my last QS stock article, I talked about how shares have received a lift recently, from the pivot back to a “risk on” mindset by the market, as worries about macro issues like inflation and interest rates ease.

With this, I believed that shares were at risk of experiencing what I called a “two-step plunge.”

Of course, “step one” of this plunge scenario hasn’t exactly played out. The Federal Reserve didn’t surprise the market with another rate hike. Instead, the Fed did as expected, opting not to raise interest rates this month.

However, while there was a pause rather than a hike, other remarks from the central bank suggest more rate hikes are coming, between now and the end of 2023. With this, the “new bull market” may now be running on empty. A market reversal could come next.

In short, “step one” could still play out in the near-term, just not in the way I theorized previously.

After rising by around 29% in the past month, on market momentum rather than on news/improved fundamentals, QS could quickly cough back recent gains. That’s not all. There remains a high chance “step two” of my plunge thesis plays out.

The Takeaway for All Types of Investors

Much like how Patil put it in his above-mentioned downgrade, the story with QuantumScape will not change until there is greater certainty with the company’s full move out of the pre-revenue stage.

Although such story-changing news could arrive later this year, it is also very possible that the company reports the “same old, same old” of continued cash burn, all while details on reaching the mass production stage remain vague.

Again, like I’ve argued in prior commentary, this will likely lead to a further slide for the stock. That’s not to say investors today are at risk of a total wipeout.

But with potential upside still highly questionable, and considering the high chance of negative returns in the short, medium, and long-term, no matter your time horizon, it remains best to stay away from QS stock.

On the date of publication, Thomas Niel did not hold (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.