Quantum Computing (NASDAQ:QUBT) has been at the forefront of the astronomical surge in quantum computing stocks, driven by the technology’s immense potential and the ever-present FOMO phenomenon. In just four months, the company’s shares have surged by more than 1,500%.
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More recently, Nvidia CEO Jensen Huang threw some cold water on the rabid excitement surrounding the industry during his recent appearance at the Consumer Electronics Show earlier this month. The tech paragon shared his belief that real-world application of quantum computing remains over a decade away.
However, Nvidia announced shortly thereafter its intention to hold Quantum Day, sending mixed signals to the market regarding which way the quantum winds were blowing.
For a top investor known by the pseudonym PropNotes, the way forward is clear – and the verdict is not promising.
“QUBT’s [$1.5 billion] market cap is largely speculative, and we see significant downside risk as the company struggles to compete with industry giants and other startups,” asserts PropNotes who sits in the top 2% of TipRanks’ stock pros.
PropNotes finds QUBT’s billion-dollar valuation difficult to justify, particularly given its modest $100,000 in quarterly revenue. The company’s $5.5 million in operating expenses further exacerbate the concern, resulting in what the investor calls an “enormously negative operating margin in percentage terms.”
Adding to the worries, PropNotes highlights a disconnect between the company’s stated revenue drivers – TFLN (thin-film lithium niobate) devices – and its actual revenue, which appears tied to an underwater quantum LiDAR prototype delivered to Johns Hopkins University.
“The apparent differences between the company’s stated goals and actual revenue sources make the investing thesis difficult to grasp,” explains PropNotes, who is not thrilled with the company’s “scattershot” tactics.
The recent capital raise does not provide the investor with much confidence, either. Though QUBT was able to raise some $190 million by issuing shares during the recent bull run, PropNotes remains dubious that the company has what it takes to compete with the big dogs.
“The firm seems woefully under-equipped to compete with industry juggernauts like Microsoft, Google, and IBM, who have all shown recent updates with their quantum businesses,” states PropNotes.
Taking all of this into account, PropNotes delivers a decisive verdict: QUBT is a Strong Sell. (To view PropNotes track record, click here)
While QUBT has garnered significant investor interest, only one Wall Street analyst has focused on the quantum computing company. Ascendiant’s Edward Woo rates the stock as a Buy, though his $8.50 price target suggests a 22% downside from current levels. The analyst may revise his target or rating in the coming months. (See QUBT 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.
