D-Wave Quantum (QBTS) has recently experienced a significant surge in its stock, rising over 100% in the past week, despite reporting a wider-than-expected earnings loss for its fourth quarter. The company reported revenue of $2.3 million and a record $18.3 million in bookings, driven by the sale of its Advantage quantum computer to a German research institute. However, the company claims it has achieved quantum supremacy and grabbed the market’s attention. Despite its operating losses, D-Wave’s forward-looking revenue forecast exceeds $10 million, reflecting optimism in its growth trajectory within the quantum computing sector.
The Holy Grail? We’ve Got One, It’s Very Nice.
D-Wave Quantum is focused on delivering quantum solutions for intricate computational problems across different sectors. Their main offerings comprise quantum computing machines, quantum computing services accessible via the cloud, and a range of software tools that utilize quantum technology for various applications.
The company has announced a significant milestone in quantum computing, asserting that it has achieved “quantum supremacy” by solving a complex real-world problem with its quantum systems. This achievement represents a pivotal moment for D-Wave, which has pursued the development of quantum computing for 25 years, investing over $500 million in the process. Despite some skepticism from researchers and industry figures like Nvidia (NVDA) CEO Jensen Huang, who recently questioned the practicality of quantum computing in the near term, D-Wave’s claim has been published in the journal Science, lending credibility to their work. The development suggests that D-Wave has crossed a critical threshold, which may lead to practical quantum computing applications, marking a significant step forward in the industry.
CEO Alan Baratz emphasized the importance of this achievement, describing it as reaching “the Holy Grail of quantum computing.” This development adds a new dimension of possibility to D-Wave’s work and could potentially validate the controversial technical path the company has followed. As the first in the industry to demonstrate quantum supremacy, D-Wave sets a precedent for future advancements and applications in quantum computing.
The company reported fourth-quarter fiscal 2024 financial results, revealing a 21% decline in revenue to $2.3 million from the previous year. However, bookings saw a significant rise of 502% to a record $18.3 million. The GAAP and Non-GAAP gross profits fell by 25% and 28%, respectively, with corresponding decreases in gross margins. Operating expenses increased due to higher personnel and fabrication costs, while professional fees decreased. The net loss surged to $86.1 million, driven by a substantial non-cash charge related to warrant liability remeasurement. The company ended the quarter with $178 million in cash, having raised $307.5 million through equity issuance. Looking ahead, management has issued guidance to expect the first quarter of fiscal 2025 revenue to surpass $10 million, notably from the sale of a quantum computer.
Analysts Remain Bullish
Wall Street analysts following the company continue to be bullish on its prospects. For instance, analysts B. Riley and Roth MKM have raised their price targets for shares of D-Wave following the company’s Q4 results. B. Riley increased its target from $11 to $12, noting that despite mixed sales and EPS figures, several positive long-term factors are making the shares an attractive entry point. Roth MKM increased its target from $7 to $10, highlighting D-Wave’s ability to generate revenue and expand its sales efforts in key sectors. The company also shows potential for hardware sales diversification beyond its core quantum cloud services. Both analysts maintain a Buy rating on the shares.
D-Wave Quantum is rated a Strong Buy overall, based on the recent recommendations of five analysts. The average price target for QBTS is $9.63, which represents a potential downside of -5.12% from current levels.
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