Quantum computing stocks have overtaken the market this month, sparked by Google’s (GOOG) announcement of the “Willow” quantum chip. Rigetti Computing (RGTI) has led the pack with a significant surge in stock value, escalating by a whopping 50% in the last five sessions and roughly 600% over the past month. Despite the mania, Rigetti’s financial performance remains modest, with the previous quarter yielding just $2.4 million in revenue.
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The company’s mission is to deliver a full-stack quantum computing system, and it has projects underway to enhance qubit fidelity and introduce innovative system architectures. The tech firm is even slated to launch a 36-qubit system by mid-2025 and a system exceeding 100 qubits by the year’s end. Additionally, Rigetti has partnered with Quantum Machines to automate quantum computer calibration using AI and is developing technology to rectify quantum errors.
Also noteworthy is its novel chip fabrication method, known as ABAA, which augments qubit performance. However, Rigetti still has a way to go before bringing a commercially viable product to market. The current valuation may be warranted in time, but investors are buying in at all-time highs and must be patient (potentially for years) for this story to play out.
Developing Full-Stack Quantum Technology
Rigetti develops quantum technology to create the world’s most powerful quantum computers. The company’s full-stack development approach spans chip design and manufacturing to cloud delivery, providing what it believes to be the most efficient and low-risk path to creating potentially game-changing quantum computing opportunities.
Building on years of innovative work, the company holds patents for its groundbreaking multi-chip processor and hybrid quantum-classical approach. Most recently, Rigetti is working on launching its 84-qubit Ankaa-3 system, featuring enhanced hardware design and significant progress in two-qubit gate fidelity. The system will be available via the Rigetti Quantum Cloud Services platform, and it will also be accessible on Amazon Braket (AMZN) and Microsoft Azure (MSFT) in Q1 2025.
In a collaborative effort, Quantum Machines and Rigetti achieved a major breakthrough by successfully applying AI to automate the 9-qubit Rigetti Novera QPU calibration. Displaying the potential of AI in quantum computer calibration, they recorded high accuracy in setting up both individual and pairs of qubits.
Further supporting the advancement of quantum error correction technology, Rigetti has partnered with Riverlane, and the National Quantum Computing Centre has opened a facility featuring a fully operational 24-qubit Ankaa-class system for quantum computing R&D.
Burning Cash, but Well Capitalized
The company recently announced its financial results for the third quarter of 2024. Total revenue amounted to $2.4 million, while total operating expenses were significantly higher, at $18.6 million. Consequently, the firm experienced an operating loss of $17.3 million. The disparity between revenues and operating expenses also led to a net loss of $14.8 million and GAAP earnings per share (EPS) of -$0.08.
However, as of the close of this quarter, the company reported a substantial amount in cash, cash equivalents, and available-for-sale securities, comprising a total of $92.6 million.
Positive Momentum but Rather Pricey
The stock has exhibited meme-like behavior, shooting up over 1750% in the past year. It trades near the high end of its 52-week price range of $0.66 – $19.35 and shows ongoing positive price momentum as it trades above major moving averages. Its P/S ratio of 234x, compared to the Information Technology sector average of 3.28x, suggests a disconnect between valuation and current reality.
Analysts following the company have been bullish on RGTI stock. For instance, Craig-Hallum’s Richard Shannon, a five-star analyst according to Tipranks’ ratings, recently initiated coverage of Rigetti with a Buy rating and $12 price target on the shares, noting the company has unique scaling advantages relative to its direct peers.
Six analysts recently recommended that Rigetti Computing be rated a Strong Buy overall. However, their average price target for RGTI stock is $5.20, which represents a potential -69.56% pullback in the share price over the next 12 months.
Rigetti in Review
Rigetti has experienced an impressive surge in stock value, yet despite promising technical advancements and valuable partnerships, the company’s actual revenue figures remain humble. The company’s future success depends on its ability to produce a commercially viable product. Investors showing faith in Rigetti and willing to buy at these elevated price levels are advised to be patient and wait for the company’s long-term plans to unfold.
