Avoid the D-Wave Quantum (QBTS) Stock Hype and Wait for the Dip

D-Wave Quantum (QBTS) is an exciting but risky bet in quantum computing. Its Q1 revenue looks strong, but a big chunk comes from a one-time sale. While bookings are growing fast, steady revenue isn’t there yet. A stock correction seems likely before a better buying opportunity.

D-Wave Quantum (QBTS) is one of the hottest names in quantum computing, drawing investor attention as the broader sector gains momentum. Amid the AI-driven Internet of Things (IoT) tech boom, their core offering includes quantum computers, cloud-based quantum computing services, and a suite of software tools. These tools are designed to harness quantum capabilities for applications across all sectors, including small and medium-sized businesses.

The stock is up 26% this year and trades in the middle of its multiyear $1-$10 range. In other words, QBTS is bang in the middle of no-man’s land with equal potential to reach above $10, as it does to reach lows around $1 and become a penny stock again.

All in all, QBTs is an early-stage tech investment that comes with the kind of risks typically seen in venture capital. With a sky-high price-to-sales ratio of over 250, the stock is due for a significant price correction since much of its anticipated $10 million in Q1 revenue is driven by a one-off, non-recurring sale. Investors should tread carefully.

D-Wave Grabs a Piece of the Quantum Future

D-Wave has carved out a strong niche in quantum computing by delivering practical, real-world solutions that enhance its credibility and market positioning. A standout statistic is its 128% growth in bookings for FY24, signaling strong demand and the potential for meaningful revenue expansion. This surge is driven by increasing cloud adoption, multi-year contracts, and steady system sales, making a case for solid, long-term revenue generation.

Unlike many of its peers, which are still in pure research mode, D-Wave is already commercializing its technology with over 100 paying customers. These include companies actively using its quantum annealing technology for optimization and problem-solving—areas where D-Wave has a competitive edge. This early commercial traction differentiates D-Wave from its quantum rivals, giving it an immediate market opportunity while others remain in R&D mode.

Financially, the company holds over $300 million in cash as of mid-March and carries no major debt, ensuring it has ample runway to fund operations for the next few years without the immediate need for dilution through additional stock offerings. That said, management will likely pursue further capital raises strategically to maintain its competitive edge in this highly specialized field. Establishing a strong foothold in quantum computing requires deep investment, and D-Wave appears committed to sustaining its advantage.

While big names like IBM (IBM) and Google (GOOGL) dominate headlines in the quantum space, D-Wave’s specialized quantum annealing technology provides a distinct edge. Unlike general-purpose quantum computing, which is still in its infancy, D-Wave’s tech focuses on optimization and sampling problems—practical applications that companies can benefit from today. This niche approach positions D-Wave as a revenue-generating pioneer in an otherwise speculative industry.

Despite its lofty valuation, the long-term growth trajectory remains promising. With a trailing 12-month price-to-sales ratio of 250 and a high 14-day RSI, the stock is overbought in the short term. However, given its robust bookings growth and operational momentum, patient investors could be handsomely rewarded in the years ahead. While a correction may be on the horizon, the fundamentals suggest that D-Wave is well-positioned for the long run.

QBTS Stock Is Overvalued for Now

However, I remain neutral on QBTS because there is an equal and opposite flip side. D-Wave’s annual revenues stalled in 2024. This lack of revenue growth raises concerns about whether the company has found a scalable business model or achieved a strong product-market fit. While bookings growth is impressive, it’s not the same as realized revenue—if these deals don’t convert as expected, the stock could see sharp declines.

Moreover, D-Wave’s Q1 2025 revenue guidance of $10 million looks promising at first glance, but it’s largely due to a non-recurring sale. Once this temporary boost fades, the stock could face a significant sell-off if Q2 guidance weakens. This adds a layer of uncertainty that could deter investors looking for more predictable revenue streams.

Another red flag is that D-Wave’s revenue lags behind other small competitors. For example, Rigetti (RGTI) recently reported $10.8 million in revenue, while IonQ (IONQ) outpaced both with $43 million in FY24. Unlike D-Wave, IonQ benefits from more consistent revenue streams rather than relying on sporadic, large-scale deals. This unpredictability could keep D-Wave’s stock volatile for the foreseeable future.

Profitability also remains elusive, with a massive GAAP net loss of $143.9 million for FY24. While QBTS is well-capitalized now, its ongoing R&D investments could eat through its cash reserves faster than expected, forcing future stock dilution. For investors, this is a key concern—dilution risk remains significant without a clear path to profitability.

The broader quantum computing market is still in its early days, and it’s unclear how quickly enterprises will adopt these solutions. While D-Wave has some pioneering customers, scaling adoption beyond early pilot programs remains uncertain. Additionally, as IBM and Google advance their own quantum computing efforts, D-Wave’s specialized annealing approach could become less relevant in the long term. With only 76 commercial customers in 2024 (down from 78 the previous year) and many likely running experimental projects, there’s no guarantee that these engagements will evolve into large, long-term contracts.

The most significant risk for D-Wave investors is the stock’s extreme sensitivity to growth expectations. At a price-to-sales ratio of 250, even a modest market sentiment shift could make the stock tumble. While the long-term potential is undeniable, the near-term downside risk is equally significant. This makes D-Wave a highly speculative play, and investors should be prepared for volatility.

Is D-Wave Quantum Stock a Good Buy?

Wall Street analysts are overwhelmingly bullish on D-Wave, with five Buy ratings and zero Hold or Sell ratings. However, the average QBTS price target of $9.63 suggests a 9% downside over the next 12 months. This contradiction—strong analyst ratings but a projected price decline—indicates that the stock’s recent rally may have pushed it into overvalued territory. While the long-term outlook remains compelling, the near-term risk of correction is high.

See more QBTS analyst ratings

Buy D-Wave, But Not Yet

D-Wave Quantum is an exciting company in a high-growth industry, but the stock is currently overextended and priced for perfection. The company has made meaningful progress in commercialization, boasts strong bookings growth, and has a solid cash position. However, with its Q1 revenue primarily driven by non-recurring sales, a potential price correction could happen soon—especially if Q2 guidance disappoints.

For now, I’m neutral on the stock but would consider becoming bullish once the valuation becomes more reasonable. Investors interested in D-Wave should keep an eye on the stock price post-Q1, as a correction could provide a much better entry point for those looking to capitalize on the company’s long-term potential.

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