‘Bubble Bound to Burst,’ Says Top Investor About Rigetti Computing Stock

Last week’s Nvidia-hosted Quantum Day was replete with headlines and developments, along with an all-star cast of industry players who took part in the festivities. Rigetti Computing Stock (NASDAQ:RGTI) was among those who attended the gathering.

Quantum Day was an opportunity for Nvidia CEO Jensen Huang to share with the world his belief that “quantum computing has the potential and all of our hopes that it will deliver extraordinary impact.” Huang also announced that Nvidia will be opening a quantum research center in Boston – an additional show of support for the industry.

This, of course, came a few months after Huang had helped ignite a bear run for quantum stocks by publicly doubting the near-term applicability of the technology. Though they have fallen considerably since early January, quantum stocks are still riding massive gains over the past half year. RGTI, for instance, is up over 1,200% since the beginning of October.

One top investor known by the pseudonym JR Research thinks this is much too high for a company that won’t see profits for quite some time.

“Investors must be cognizant that the company is not anywhere close to breakeven,” reminds the 5-star investor, who is among the top 2% of TipRanks’ stock pros.

JR does take some solace from Rigetti’s strong liquidity position, which should give the company a solid runway of three years. In addition, the investor notes that the company has been cautious about making claims regarding commercialization, asserting its focus will be centered on R&D supporting the “scalability of its superconducting qubits.”

Still, this does not exactly affirm a near-term investment thesis, explains JR.

“With practical applications for quantum computing at least four to five years away (or possibly more), equity dilution risks from future raises cannot be downplayed,” adds the investor.

As for the current valuation, JR argues that a forward sales multiple north of 170x is far from “sensible,” leaving plenty of room for losses up ahead.

“I believe the drawdown on RGTI’s surge over the past year might not be over, and investors should consider using the recent consolidation to cash out their gains before they possibly disappear,” concludes JR Research, who rates RGTI a Sell. (To watch JR Research’s track record, click here)

Unlike JR, however, Wall Street still feels that there are plenty of “gains” left for RGTI. With 6 Buy ratings, RGTI enjoys a Strong Buy consensus rating. Its 12-month average price target of $14.80 implies gains north of 50% in the coming year. (See RGTI stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.