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Quantum computing, an advanced realm of technology most familiar to the general public thanks to science fiction movies, finds applications in various domains. Leveraging principles of quantum physics and computer science, the cutting-edge tech has use cases across cryptography, drug discovery and material science, artificial intelligence (AI) and machine learning, and climate modelling and sustainability, to name a few.
What makes quantum computing so powerful is the use of "qubits." Qubits are special because they can represent 0, 1, or both at the same time, thanks to a phenomenon called superposition. This allows quantum computers to explore many possibilities simultaneously, making them incredibly powerful for solving certain types of problems.
Consulting firm McKinsey is quite optimistic about the prospects for quantum computing-led growth, with this report predicting that the technology could create collective value of about $2 trillion by 2035 across industries including chemicals, life sciences, finance, and mobility.
While tech giants like IBM (IBM) and Microsoft (MSFT) are involved in quantum computing technology, most “pure play” quantum computing companies are still speculative penny stocks as the technology attempts to gain traction. However, quantum computing stocks were thrust into the spotlight recently when none other than trillion-dollar tech giant Amazon (AMZN) debuted its Amazon Web Services (AWS) Quantum Embark Program. This advisory platform aims to help customers prepare for the quantum computing era by introducing potential use cases, offering workshops, and ultimately preparing to onboard them to Amazon's quantum offering, in a move that's widely expected to bring the niche technology to a wider audience.
Against this backdrop, here's a closer look at one standout stock under $10 in the quantum computing space.
About Quantum Computing Stock
Aiming to be synonymous with the industry, hence the name, Quantum Computing Inc. (QUBT) was founded in 2018. The company is focused on developing innovative quantum computing solutions, combining quantum software and hardware. Its goal is to make quantum computing accessible to businesses without requiring expertise in quantum mechanics. The company is currently valued at a market cap of $623.5 million.
Helped by recent milestone deal wins and the AWS booster, QUBT has been on a tear in 2024, soaring an eye-catching 683% on a YTD basis.
Given QUBT's status as a growth-fueled stock that spent most of the year trading in penny stock territory, it's worth considering whether such a staggering short-term rally is sustainable. So, is QUBT stock still a buy after its big breakout month? Let's find out.
Strong Q3 Report
While the company is not yet profitable, Quantum Computing's results for the most recent quarter featured a doubling of revenues and narrower losses - both positive developments for the company. Third-quarter revenues surged to $101,000 from $50,000 in the year-ago period, while losses per share narrowed to $0.06 per share from $0.10 per share in the prior year.
Further, net cash used in operating activities for the first nine months of 2024 also reduced, coming in at an outflow of $12.4 billion compared to $13.3 billion in the year-ago period. Overall, the company bolstered its cash balance from the start of the year to $3.1 million from $2.1 million. Short-term debt levels were also lower, at $923 million.
This reflects that the company is not only focused on growing its revenues during this phase, it is also making efforts to manage its balance sheet prudently.
Strategic Drivers for QUBT
Quantum's recent rally can be attributed to its announcement of two significant orders within a short span. On Nov. 13, the company reported its first order for its thin film lithium niobate (TFLN) photonic chip foundry, followed shortly after by a second purchase order from the University of Texas at Austin on Nov. 20.
These orders underscore the importance of the innovative TFLN technology in photonics, a field critical to advancements in fiber optic communication, sensors, and quantum computing. TFLN is emerging as a transformative material for constructing ultrafast optical modulators, which can replace traditional semiconductor materials like silicon in data center applications.
For context, silicon semiconductors typically operate at a limit of 800 gigabits per second, whereas TFLN supports transmission rates of up to 1.6 or even 3.2 terabits per second. Furthermore, TFLN’s exceptional light interaction efficiency significantly reduces energy consumption, making it a superior choice for high-performance photonic devices.
Orders are starting to roll in as QUBT nears completion of its TFLN foundry in Tempe, Arizona, marking a pivotal step in its strategy to become a leader in photonic integrated circuits and nanophotonic devices. The foundry’s commissioning is expected to conclude by the end of 2024, with production anticipated to commence in Q1 of 2025.
Additionally, Quantum's Qatalyst platform serves as a quantum application accelerator, allowing developers to create and run quantum-ready applications on classical computers while preparing for seamless execution on quantum machines. This user-friendly approach is expected to foster a dedicated customer base, driving stable, long-term revenue growth.
What Do Analysts Say About QUBT Stock?
QUBT stock has limited coverage on Wall Street, with the only analyst following the stock deeming it a “Moderate Buy.” The target price of $8.50 denotes an upside potential of about 27.8% from Monday's close.
As the company starts to ramp up production, QUBT stock is best reserved for those with a higher tolerance for risk and a longer time horizon. However, this quantum computing stock looks like an intriguing pick for investors in search of compelling growth stocks to buy under $10.
