Google's Quantum Chip Sparks Major Stock Concerns

Google's latest quantum computing advances impacts shares. Analysts forecast significant declines for Rigetti and D-Wave stocks, presenting a cautionary tale for investors.

Date: 24-01-2025

AI Rating: 4

Stock Declines Expected for Rigetti and D-Wave

The report indicates that both Rigetti Computing and D-Wave Quantum are likely to see stock price declines in the near future. Analysts forecast a 77% downward adjustment in Rigetti's stock price from $13.90 to a target of $3.25 per share. Similarly, D-Wave's stock, currently at $6.25, is expected to drop by 52% to a target of $3.00 per share. This significantly negative outlook is based on weak financial performance and high valuations.

Rigetti Computing Analysis

Rigetti reported a 24% revenue decline to $2.4 million in the third quarter, in addition to a GAAP net income loss of $0.08 per diluted share. The company spent $42 million in cash over the first nine months of 2024 and has only $20 million left on its balance sheet, raising liquidity concerns. Moreover, with a price-to-sales ratio of 180, its valuation appears exceedingly high compared to the average S&P 500 company at 3. This combination of declining revenue and excessive valuation leads to the analyst's recommendation for current investors to consider selling their shares.

D-Wave Quantum Analysis

D-Wave reported an even more severe 27% revenue decline to $1.8 million, with a GAAP net income loss of $0.11 per diluted share. The company burned $45 million in cash through the first nine months of 2024, while having only $29 million on its balance sheet. Importantly, interest payments are consuming more than half of revenue. D-Wave's stock trades at 115 times sales, indicating a problematic valuation. Analysts suggest that prospective investors should avoid D-Wave shares, and current shareholders might also want to consider selling.

In conclusion, both companies present significant risks in their current financial states and market expectations. These factors could lead to adverse reactions in their respective stock prices.

Stocks: RGTI QBTS