Quantum Computing Stock Could Rise 67%, Says Analyst. Here’s Why.

Ascendiant Capital Markets reiterated a Buy rating on shares of Quantum Computing and raised its price target to $40 from $22. (Globe News Wire)

Key Points

• Ascendiant Capital Markets reiterates a Buy rating on Quantum Computing, and raises its price target to $40 from $22, suggesting nearly 70% upside.
• Quantum Computing’s revenue of $61,000 in the fiscal second quarter met estimates, while earnings of 26 cents a share exceeded Ascendiant’s forecast.
• The company’s stock has gained 2,757% over the past 12 months.

Quantum Computing strives to “put quantum into the hands of a billion people.” While that may sound like a lofty goal, the Hoboken, N.J.-based company has some fans in its corner.

One persistent bull has been Ascendiant Capital Markets analyst Edward Woo, who reiterated a Buy rating on the shares and boosted his price target to $40 from $22. The firm initiated coverage on the stock in November 2021, rating it at Buy.

Shares surged 19% to $23.91 on Friday, with Woo’s updated price target suggesting 67% upside.

Quantum reported its fiscal second-quarter results in August, with Woo noting that revenue of $61,000 came in in line with his firm’s estimates. The company declined to provide guidance.

And while critics have questioned the quantum hype, arguing the technology has yet to reach its full potential, Woo sees it going hand in hand with ratcheting data generation, which has driven up the demand for high-performance computing.

“By being early in this rapidly growing industry, we believe Quantum is well-positioned to capture and drive a meaningful market share and industry growth,” Woo wrote.

The company has an odd history. At the turn of the 21st century, it was looking to sell ink-jet cartridges online. Then, in 2007, it became a beverage distributor. After folding in 2017, the company was acquired and changed its name to Quantum Computing.

Today, it operates across several business verticals. While its Tempe, Arizona-based foundry is the biggest factor setting it apart from peers like IonQ and Rigetti Computing, the company has other offerings such as its Dirac-3 quantum computer.

Of course, Woo is also bullish on Quantum Computing’s thin film lithium niobate foundry. The facility opened its doors earlier this year and is currently filling presales as well as “numerous orders,” Woo noted.

As of its second quarter, the company had $349 million in cash and no debt. In September, the company announced a $500 million private placement, saying it planned to issue nearly 26.9 million shares to several large existing shareholders and as one new investor.

Woo conceded that the stock’s valuation has ballooned over the past 12 months. Quantum Computing has surged 3,249% over that period. Peers D-Wave and Rigetti have seen similarly momentous gains, rising 3,050% and 4,544%, respectively.

Still, “we believe there is still significant upside as interest in quantum computing industry continues to grow rapidly,” Woo wrote. It may seem like a very optimistic take, but recent stock moves are proof of unflagging investor enthusiasm. Rigetti, for one, has rallied for four straight days after announcing product orders for two new quantum systems.

The Defiance Quantum ETF, which counts Rigetti and IonQ among its largest holdings, has risen 30% this year, better than a 15% increase for the S&P 500. Again, momentous gains. But Woo believes the broader quantum computing market, which is projected to grow to $72 billion by 2035, “presents high rewards for the risks.”

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com