Quantum Fuel Systems (QTWW) A $10 Stock In The Making As Fisker's Hybrid Sports Car Set To Go Mainstream...

We have been accumulating a very large position in QTWW here in the $2s as we believe Fisker Automotive's first hybrid premium sports car named the Karma is set to be a huge success in 2009 and beyond. The Karma, which is powered by Quantum's "Q-Drive" hybrid engine, is the first of a set of premium sports cars designed by world-renowned Henrik Fisker who is also credited with designing some of the most beautiful cars on the road including Aston Martins as well as BMWs. The Karma which is set to go on sale in North America in late 2009 and Europe in 2010, boasts a mind-numbing 100 mpg fully-electric engine capable of launching you from 0-60 mph in 5.8 seconds and a top speed of 125mph. The pent up demand for a premium hybrid sports vehicle of this caliber is extremely significant in our opinion, and the launch of the Karma will without doubt force other premium car makers to produce hybrid sports cars as well, as consumers worldwide are finally exposed to the reality of what was previously thought of as impossible...a fairly priced hybrid sports car with power equivalent to that of its gas-guzzling counterparts.

Moreover, don't think for a second that Quantum has its entire fortunes banking on the success of this one vehicle. The company is also producing the engine for the hydrogen-fueled Toyota Prius as well as GM's upcoming fuel cell hybrid known as the Equinox. Tack on Quantum's 25% interest in German solar company Asola, which just announced a $17M solar contract, as well as plans to triple plant capacity due to increasing demand for photovoltaic systems in Europe, and Quantum is without doubt extremely well positioned to meet the increasing demand for alternative energy products over the next several years.

As a sign of Quantum's recent success in the marketplace and hopefully an indication of things to come look no further than Q3 2008s whopping 209% year over year revenue increase, going from $2.3M in Q3 2007 to $7.1M in Q3 2008. The company attributes the surge in revenue to increased hydrogen-based hybrid and fuel cell hybrid vehicle product sales and higher development revenue programs. While the company has yet to turn profitable it is absolutely moving in the right direction trimming its operating losses by 53% from $3.0M in Q3 2007 to $1.6M in Q3 2008. With an expected continuation of ramping revenue due to increasing demand for hybrid vehicles, we expect profitability is simply a matter of time. While the stock has come well off its lows of under $1, we believe institutions are accumulating shares here (indicated on the chart by a recent surge in volume over the the past 2 months) in preparation for a massive launch of a host of Quantum powered hybrid vehicles in 2009 and expect a strong continuation of the uptrend in shares throughout the year. As Quantum's expertise in the hybrid engine business continues to gain traction spurred by the success of the Fisker Karma as well as Asola's booming solar business, we expect revenues to ramp significantly over time, taking QTWW back to a respectable market cap of ~$750M and shares back to their January 2004 highs of $10. We continue to be strong buyers of QTWW shares here in the $2s and are looking to add on any dips that may present themselves.