Rigetti Computing Stock Extends Its Rally. Why This Analyst Expects the Good Times to Continue.

Rigetti Computing said on Sept. 30 that it had secured orders for two quantum systems, causing shares to rally. (Drew Bird / Rigetti)

Key Points

• Rigetti Computing’s shares have rallied for six consecutive days, and Benchmark boosted its price target to $50 from $20.
• The company recently secured product orders for two quantum systems from a technology manufacturer and a start-up, expanding beyond government clients.
• Rigetti’s stock has risen 184% this year, significantly outperforming the S&P 500’s 14% increase, despite not yet being profitable.

Rigetti Computing shares have rallied for six days straight, notching multiple records. The company is blazing a path toward commerciality, analysts say.

Benchmark analyst David Williams boosted his price target on the stock to $50 from $20 and reiterated a Buy rating on Tuesday. Shares climbed 3.67% to $43.24, putting the stock on pace to close at a new record.

With $575 million in cash following a $350 million capital raise in June, the company has “ample runway to fund its R&D roadmap through anticipated commercialization timelines,” Williams wrote, adding that “Rigetti’s execution continues to validate its long-term strategy.”

And execute it does. Rigetti’s 36-qubit multi-chip quantum computer became generally available in August, after months of the company targeting “mid-2025” for deployment.

One of the most encouraging signs of progress was an announcement last week that Rigetti had secured product orders for two quantum systems. While the company declined to name the buyers, describing them only as a technology manufacturer and a start-up, they marked a departure from Rigetti’s usual clients in the government realm.

It’s difficult to predict how quantum stocks will trade following such an announcement. Sometimes, the news underwhelms investors, who grow frustrated with the sluggish pace of quantum development. Other times, the news causes shares to skyrocket.

Shares rallied for days following the announcement on Sept. 30 and ended Friday’s session up 13% at $40.06. The stock has since usurped that record, closing at $41.71 on Monday.

The news indicated that the technology was starting to break out of the lab, a point Williams affirmed on Tuesday. “While any single milestone may appear modest in isolation, the steady cadence of progress, from expanding hardware sales and customer traction to strategic acquisitions and technology breakthroughs, tend to boost investor confidence,” he wrote.

The analyst is a fan of Rigetti’s expanding roster of clients, writing that “the combination of government grants and public hardware sales signal increasing confidence in its technical roadmap and strategic positioning.” Barron’s reported in August that Rigetti had been selected for a $5.8 million Air Force contract, which the company confirmed a month later, causing shares to surge.

And Rigetti isn’t the only one making progress. Williams noted that the broader quantum industry itself has undergone a sharp rerating in recent months, which he attributes partly to increasingly mature business models, “providing optimism that commercialization may be nearer than previously anticipated.”

The sector has outperformed the broader market as of late. Rigetti stock has risen 184% this year, outstripping an increase of 14% for the S&P 500 . The gains on their own might raise eyebrows, but they take on another degree of skepticism considering none of the pure play quantum companies, Rigetti included, have yet to turn a profit.

It’s easy to dismiss Williams for being too optimistic, but it’s also too early to write him off completely. It’s impossible to say with certainty what the quantum ecosystem will look like in a few years, and industry experts and bulls alike admit that the technology is years away from reaching its full potential.

Quantum systems are extremely sensitive to environmental disturbances, which increases their propensity for errors. As a result, the technology currently has limited applications. While companies like D-Wave Quantum boast a lengthy roster of commercial clients, the machines largely exist in a controlled setting, with customers accessing power over the cloud.

Major players like IBM are targeting the end of the decade for the first fault-tolerant machines, which can catch and correct errors as they arise.

Williams, for one, is prepared to come along for the ride. Rigetti has entered a period of renewed investor attention, which is only supported by “sector-wide funding momentum and tangible proof points of progress toward scalable quantum computing,” the analyst wrote.

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