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D-Wave (QBTS) has been on a wild ride over the past 52 weeks, with shares up 638% in that time frame. The gains have been driven by renewed investor enthusiasm for quantum computing stocks, with many betting that 2025 will be a transformational year for the industry. This comes on the back of Google (GOOGL) unveiling its Willow quantum chip.
Willow demonstrated that it was capable of solving complex math problems in just a few minutes, dramatically outperforming traditional supercomputers that would have needed 10 septillion years. For investors, this became a catalyst to look at pure-play quantum computing companies involved in producing quantum computers, quantum processors, and other quantum-related solutions. QBTS has been one such winner in recent months.
However, according to new filings with the U.S. Securities and Exchange Commission, one of its biggest backers may be giving up. California’s Public Sector Pension Investment Board, also referred to as PSP, has historically been the largest investor in D-Wave.
As Barron’s reported today, PSP sold 19.7 million shares from Jan. 10 through Jan. 14, worth just over $90 million. This left it with 20.4 million shares, but a second filing suggests the investment board plans to sell those as well.
So, is the writing on the wall for QBTS stock? How should investors play shares now?
About D-Wave Stock
Based in Palo Alto, California, D-Wave bills itself as the “practical quantum computing company.” It also says it is the only company that sells quantum systems, cloud solutions, and application tools for an “end-to-end quantum journey.”
More specifically, D-Wave markets its Advantage quantum system, its Leap quantum cloud services provider, which allows customers access to quantum systems via the cloud, and the Ocean suite of open-source quantum development tools.
The company is valued at a market capitalization of $1.2 billion.
Quantum Cloud Revenue Jumps 41%
D-Wave’s third-quarter results reflected a year-over-year drop of 27% in revenue to $1.9 million. However, its quantum cloud as a service (QCaaS) business reported revenue growth of 41% year-over-year to $1.6 million. The culprit for its lower overall revenue was its professional services segment, which saw revenue fall 80% due to the timing of certain new contracts. This seems in line with commentary from Rigetti Computing (RGTI), which highlighted in a recent interview that government contracts greatly influence its sales. Government customers currently account for 66% of D-Wave’s revenue.
D-Wave also reported that total customers increased to 132 from 125, and that it added an additional commercial customer in the third quarter, bringing its total to 76.
Business updates in Q3 included collaboration with tobacco and telecom companies in Japan, and achieving key “awardable” status with the Department of Defense, meaning that it will be eligible for contracts as part of its Tradewinds buying platform.
Looking ahead, the company says it expects fourth-quarter revenue and bookings to improve sequentially from Q3.
Is QBTS Stock a Buy Now?
With California’s PSP shaking things up, how should investors approach QBTS stock? Analysts have a consensus rating of “Strong Buy,” with six analysts giving it individual “Strong Buy” ratings and one giving it a “Moderate Buy” rating. Its average price target of $5.18 is slightly lower than its current trading price, but D-Wave shares trade roughly 50% below their Street-high target of $9 and 120% below their 52-week high above $11.
This suggests that for investors willing to stomach the risk, D-Wave could be a smart buy now near $5.45 a share.
