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Stocks in the quantum computing segment have delivered eye-popping returns for investors over the past year. One such tech stock, Quantum Computing (QUBT), has surged around 1,000% since January 2024, leaving even the most bullish analyst price targets in the dust. Quantum Computing recently announced a new partnership with NASA, contributing to its robust rally. Currently, valued at a market capitalization of $1.28 billion, QUBT stock trades at a lofty multiple in early 2025.
So, let’s see if the investment is purely speculative or based on certain fundamentals.
QUBT Stock Is Highly Volatile
Quantum Computing’s meteoric rise reflects growing confidence in its transformative potential. After surging alongside peers like Rigetti Computing (RGTI) and D-Wave Quantum (QBTS), QUBT stock is down over 60% from its all-time highs. In fact, the tech stock tumbled 43% in a single trading session on Tuesday after Nvidia (NVDA) CEO Jensen Huang offered a sobering timeline for practical quantum computing applications.
During a conversation with analysts at CES, Huang estimated that “useful” quantum computers are likely 15-20 years away, dragging QUBT and its peers lower. The market reaction was swift and severe as the reality check came after a period of extraordinary gains fueled by breakthrough announcements and AI-powered enthusiasm.
In late 2024, Google (GOOGL) (GOOG) unveiled its Willow chip, which had catalyzed the sector. Investors hoped that quantum computing could follow artificial intelligence’s meteoric rise to mainstream adoption, resulting in sizeable gains for QUBT and others. However, while quantum computing could transform everything from drug discovery to cryptography, the path to commercialization remains lengthy and complex.
According to a CNBC report, Greg Bassuk, CEO of AXS Investments, noted the recent correction reflects “lofty valuations” rather than any fundamental change in the industry’s long-term prospects.
Is QUBT Stock Overvalued?
During its third-quarter earnings call, Quantum Computing outlined its strategy as an integrated photonics company focused on leveraging quantum optical properties for high-performance computing and AI applications.
Quantum Computing’s key developments in the September quarter include:
- An Arizona TFLN foundry, which is on track to begin production in early 2025, with some presales orders secured
- An extended research agreement with Los Alamos National Laboratory for quantum optimization problems
- A fifth NASA contract for space-borne LiDAR missions
In Q3 of 2024, it reported revenue of $101,000, up from $50,000 last year. Its net loss was $5.7 million, or $0.06 per share, narrower than its year-ago loss of $7.1 million. Operating expenses declined by 18% to $5.4 million. QUBT ended Q3 with $3.1 million in cash and raised $7 million through convertible debt financing and an additional $4.5 million through an ATM facility in Q4.
Quantum Computing stated it is focused on using foundry services revenue to fund quantum computing development while maintaining cost containment efforts. The company is fairly pre-revenue and is expected to burn millions of dollars in the next decade. It’s evident that Quantum Computing will have to raise capital several times to support its cash burn rate, which will significantly dilute existing shareholder wealth.
Priced at 2000x forward sales, QUBT seems significantly overvalued, and investors are betting on its disruptive technology. A single analyst tracking QUBT stock has a “Moderate Buy” rating with a target price of $8.50, down over 15% from current levels.
