Rigetti Computing (RGTI) has been a notable player in the quantum computing sector, with its stock experiencing significant growth—surging over 80% in the last month and 160% for the past three months. Recently, the company’s stock has seen a hot streak, recording nine consecutive days of gains in mid-September, attracting attention from investors eager for the next big breakthrough in technology.
However, the company’s financial fundamentals tell a different story. Rigetti recently reported quarterly results that fell short of expectations, revealing a minimal revenue of $1.8 million, down 41.9% compared to the previous year, and a hefty net loss of nearly $40 million. This financial strain indicates that investors are heavily banking on the future potential of quantum computing rather than current results.
Despite these challenges, Rigetti has showcased its innovative capabilities by recently unveiling the CPS-136Q, claimed to be the world’s largest multi-chip quantum computer—a notable technical feat although still not commercially viable. Moreover, the company took a significant step forward by securing a three-year, $5.8 million contract with the U.S. Air Force Research Laboratory to enhance quantum networking. This announcement led to a 9% spike in Rigetti’s stock price in just one day.
Nonetheless, concerns about Rigetti’s financial health persist. The company finished its last quarter with $571.6 million in cash, allowing it to cushion its operations amidst ongoing research and development efforts. However, the sharp decline in revenue, coupled with no guidance on growth from management, raises uncertainties about the company’s trajectory.
Rigetti’s lofty valuation is primarily based on speculative future growth rather than solid profit metrics. Currently, the company’s price-to-sales ratio stands at an astonishing 981x, substantially higher than its industry peers, who average around 3.56x. The metrics indicate that the market is betting on Rigetti’s potential to capture an emerging market as quantum computing transitions from theoretical research to practical applications, although this transition has yet to materialize.
Interestingly, insider trading activity has been trending downward, with company directors reportedly selling millions in stock since July, indicating a potential shift in confidence among insiders even during a period of rapid stock price growth. While insider sales can often be attributed to reasons like tax obligations or portfolio rebalancing, the timing amidst substantial gains raises eyebrows among investors.
Among analysts, Rigetti has received a Strong Buy rating, with a consensus of seven Buy and one Hold rating. Analysts have been bullish, with price targets increasing from various financial experts. One notable mention is B. Riley analyst Craig Ellis, who upgraded his target from $19 to $35, emphasizing advancements in quantum technology that are outpacing expectations. Needham’s analyst, Quinn Bolton, echoed a similar sentiment with an $18 target, praising the company’s progress in developing a high-performance quantum processing unit.
Rigetti’s potential in revolutionizing the computing landscape is immense, bolstered by its full-stack approach and technical strength. However, the company must transition from mere projections of future success to demonstrating commercial viability to sustain investor confidence. As competitors like IBM, Alphabet, and IonQ continue to innovate, any breakthrough in their capabilities could rapidly alter Rigetti’s standing in the market.
Overall, the outlook remains cautiously optimistic. While rigorous risks accompany Rigetti’s journey, the opportunities associated with quantum computing are equally significant, providing investors with a thrilling yet volatile ride into the future of technology.