The Quantum Computing Landscape
Artificial intelligence (AI) has emerged as a formidable force in the tech space over recent years. Quantum computing has the potential to keep pace with, and even supplement, AI’s expansion, given that AI platforms require more rapid computation speeds to reconcile with increasing demand. With McKinsey forecasting that the quantum computing market could reach $80 billion by 2035 or 2040, it’s worth considering the prospects for two quantum computing companies, D-Wave Quantum Inc. (QBTS) and IonQ, Inc. (IONQ), which are relentlessly pushing the boundaries in this innovative technological sphere and could be instrumental in shaping the future trajectory of the industry.
Exploring D-Wave’s Potential
Founded in 1999, Canada-based D-Wave Quantum Inc. (QBTS) develops and delivers quantum computing systems, software, and professional services for developers and enterprises worldwide. It has successfully built several quantum annealers with over 5,000 qubits, which allows greater potential for commercial applications. Its market cap currently stands at $311.9 million.
Shares of QBTS have soared a whopping 309% over the past 52 weeks, substantially outperforming the S&P 500 Index’s 32.1% increase.
Priced at 36.72 times sales, D-Wave trades at a more than 900% premium to its tech industry peers.
QBTS Rallies Ahead of Earnings
QBTS’ Q3 revenue rose 51.2% annually to $2.6 billion, with a 62% year-over-year increase in commercial revenue. Bookings for the quarter surged 53% from the prior-year quarter to $2.9 million. Another excellent metric was its increasing average deal size (or customer spend), which increased by 172% and 178% for commercial and all customers, respectively.
Moreover, as AI growth accelerates, its energy needs increase. Quantum computing promises to reduce this demand, and D-Wave’s 2000-qubit system is 100 times more power-efficient than traditional counterparts.
Last month, D-Wave included its “most performant” 1,200+ Qubit Advantage2 prototype in its Leap quantum cloud service. Available for Leap subscription customers, it is expected to produce “significant performance gains on hard optimization problems.”
D-Wave will unveil its Q4 and fiscal year 2023 earnings report ahead of the opening bell this Thursday, Mar. 28. Wall Street analysts project its revenue to increase over 95% year-over-year to $4.70 million, while the loss per share is anticipated to narrow to $0.10 in the fourth quarter. The stock surged 7.69% in Wednesday’s session, pointing to potentially high expectations for the earnings report.
QBTS has a unanimous “Strong Buy” rating from all four analysts in coverage. However, the group also shares a consensus price target of $2.00, which represents a discount of 4.7% to Wednesday’s close.
Evaluating IonQ’s Position
Headquartered in College Park, Maryland, IonQ, Inc. (IONQ) develops general-purpose quantum computing systems in the U.S. It offers access to quantum computers of varying qubit capacities through cloud platforms like Amazon (AMZN) Web Services (AWS), Amazon Braket, Microsoft’s (MSFT) Azure Quantum, Google’s (GOOGL) Cloud Marketplace, and its cloud service. Additionally, it provides hardware development, maintenance, support, and consulting services. Its market cap currently stands at $1.89 billion.
On Oct. 1, 2021, IonQ began trading on the New York Stock Exchange, becoming the world’s first public pure-play quantum computing company. At a $10.00 per share pricing, IonQ raised over $600 million.
Analysis: IonQ Faces Challenges Amid SPAC Listing Volatility
The Rollercoaster Ride of IonQ Stock
IonQ, a quantum computing company, made headlines with a whopping $650 million in funding via its SPAC listing. However, the path since then has been akin to a wild rollercoaster ride through the stock market meadows. Despite reaching a market cap north of $5 billion by late 2021, the once high-flying stock has plummeted below its merger price, leaving investors dizzy with the volatility.
Performance Comparison and Pricing Quirks
Over the past 52 weeks, IonQ shares have made strides but fell short when compared to the returns of penny stock QBTS. Despite this lag, IonQ managed to surpass the gains of the broader SPX index. Priced at an eye-watering 90.22 times sales, IonQ’s valuation carries a hefty 145.7% premium over its quantum computing rival, D-Wave.
IonQ Grapples with Widening Losses
Following the late February earnings report, IonQ shares went on a rollercoaster once more. The report revealed a stellar Q4 revenue of $6.1 million, surpassing expectations and driving annual revenue to $22 million, demonstrating a robust 98% growth. Despite this growth, IonQ saw its Q4 net loss widen to $41.9 million, or $0.20 per share, with an adjusted EBITDA loss of $20 million. The company’s investment in technology development and a new R&D facility near Seattle contributed to the losses.
Looking ahead, IonQ’s 2024 forecast paints a picture of increasing losses. The company anticipates revenue between $37 million and $41 million, with bookings expected to fall between $70 million and $90 million. However, despite these challenges, Wall Street maintains a consensus “Moderate Buy” rating on IonQ. Of the six analysts covering the stock, two recommend “Strong Buy,” one suggests “Moderate Buy,” and three advise “Hold.”
Analysts foresee a potential upside for IonQ with an average price target of $16.50, indicating an 81.1% increase over the next year. The most optimistic projection, reaching a Street-high price target of $21, hints at a potential rally of up to 130.5% from current levels.