D-Wave Quantum (QBTS) has recently seen a significant surge in stocks, which have risen more than 100% in the past, despite its fourth quarter forecast reporting wide revenue losses. The company reported revenue of $2.3 million and a record $18.3 million booking due to the sale of Advantage Quantum Computer to a German research institute. However, the company claims it has achieved quantum advantage and attracted market attention. Despite operating losses, D-Wave's future-proof revenue forecast exceeds $10 million, reflecting optimism in the growth trajectory within the quantum computing sector.
Holy Grail? We have it, it's very good.
D-Wave Quantum focuses on providing quantum solutions to complex computational problems across a variety of sectors. Their main products consist of quantum computing machines, quantum computing services accessible through the cloud, and various software tools that utilize quantum technology for a variety of applications.
The company has announced key milestones in quantum computing, claiming it achieved “quantum advantage” by solving complex real-world problems with quantum systems. This achievement represents a pivotal moment for D-Wave, where D-Wave pursued 25 years of quantum computing development, investing more than $500 million in the process. Despite skepticism from researchers like NVIDIA (NVDA) CEO Jensen Huang and industry figures, D-Wave's claims have recently been published in the journal Science, offering D-Wave's claims that are given credibility to their work. This development suggests that D-Wave has exceeded a critical threshold, leading to practical quantum computing applications and could mark a major advance in the industry.
CEO Alan Baratz emphasized the importance of this achievement, explaining that it has reached the “Holy Grail of Quantum Computing.” This development could add a new dimension of possibilities to D-Wave's work and potentially test the controversial technical path the company has followed. First in the industry to demonstrate quantum advantage, D-Wave sets precedents for future advancements and applications in quantum computing.
The company reported its financial results for the fourth quarter, 2024, revealing its revenues fell to $2.3 million from the previous year by 21%. However, in bookings, 502% rose significantly to a record $18.3 million. The GAAP and non-GAAP total profits fell by 25% and 28% respectively, with corresponding total margins reduced. Operating expenses increased due to increased personnel and manufacturing costs, but expert fees decreased. Net losses surged to $86.1 million, driven by substantial non-cash claims related to remeasurement of warrant liability. The company closed the quarter with $178 million in cash and raised $307.5 million through share issuance. Looking ahead, management issued guidance predicting that the first quarter of revenue for fiscal year 2025 will exceed $10 million, particularly from quantum computer sales.
Analysts remain bullish
Wall Street analysts chasing the company remain bullish on the outlook. Analysts B. Riley and Ross MKM, for example, raised the price target for D-Wave's stock following the company's fourth quarter results. B. Riley increased his target from $11 to $12. It should be noted that despite the mix of sales and EPS figures, some positive long-term factors make the stock an attractive entry point. Roth Mkm increased its target from $7 to $10, highlighting its ability to generate revenue for D-Wave and expand sales efforts in key sectors. The company also demonstrates the potential for diversifying hardware sales beyond core quantum cloud services. Both analysts maintain a purchase rating for their stock.
The D-Wave Quantum is generally rated as a strong purchase based on recent recommendations from five analysts. The average price target for QBTS is $9.63, representing a potential downside of -5.12% from current levels.
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