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The quantum computing industry is growing rapidly, as the rise of artificial intelligence (AI) necessitates faster and more sophisticated architecture to carry out complex tasks. Unlike binary digits used in classical computing, the technology uses quantum bits, or qubits, that can occupy the position of both 0 and 1 simultaneously, known as superposition. This allows quantum computers to work faster, run multidimensional algorithms, and solve for more complex problems.
Although major companies like Microsoft (MSFT) and IBM (IBM) dominate the market for this costly tech, some smaller startups are also making significant strides. Quantum technology is projected to add trillions of dollars in value to the economy over the next decade, which means some of the smaller stocks in this niche could be on the cusp of a hypergrowth phase.
While penny stocks can be risky, and highly volatile, they can also offer substantial rewards when they hit. So, while they're best reserved for investors with a healthy risk appetite, let's take a closer look at these three quantum computing stocks with more than 190% upside potential.
#1. Quantum Computing
Founded in 2001, Quantum Computing (QUBT) offers innovative solutions for application software and the power of quantum mechanics to tackle complex problems beyond the reach of traditional computers. It specializes in both quantum optics and quantum optics technology. QUBT serves diverse industries such as finance, healthcare, logistics, and cybersecurity. The company's innovative, integrated photonics technology operates at room temperature with low power consumption, making quantum computing more accessible and affordable.
Valued at $58 million by market capitalization, QUBT stock is down by 26.8% year to date, falling well short of the S&P 500 Index's ($SPX) gain of 15.3%. However, this could be an opportunity to buy the stock on the dip, as analysts predict more than 1,200% upside for QUBT.
On June 11, the company reported its Q1 financial results, with decent progress. Revenue came in at $27,000, with a high gross margin of 42%. Most importantly, the company trimmed its operating expenses by 18% from the previous year, driven by a strategic approach to reducing administrative expenses.
On an adjusted basis, QUBT reported a loss per share of 8 cents, matching analysts' estimates. Looking ahead, Wall Street expects the loss per share to narrow by 18% this fiscal year, on revenue growth of over 100%.
Recently, the company achieved a significant milestone by receiving a NASA contract to eliminate sunlight interference from LiDAR spectral mapping in low Earth orbit. This will help the company enhance the precision of its remote sensing technology and expand its applications in various space-based projects.
From analysts' point of view, QUBT is a" moderate buy," with the sole expert in coverage handing out a price target of $8.75. This suggests the stock has a massive 1,225% upside potential from its current price.
#2. D-Wave Quantum
Founded in 1999, D-Wave Quantum (QBTS) is a Canadian-based company specializing in developing and delivering quantum computing systems and software. Known for creating the world's first commercially available quantum computer, D-Wave focuses on providing advanced quantum solutions to address complex computational problems across various industries, including optimization, machine learning, and material sciences.
Earlier this year, QUBTS announced the 12,000-qubit Advantage2 prototype, which features advanced quantum annealing capabilities and enhanced error correction mechanisms.
With a market cap of $184 million, D-Wave Quantum stock has soared by 15.9% year-to-date, right on pace with the broader market.
One of the best things about QBTS is its revenue growth. In Q1 2024, sales grew by 56% YOY, reaching $2.5 million. Also, its gross profit increased to $1.7 million, a massive 325% jump from last year. This is a clear testament that company is rapidly scaling its operations and effectively capturing market opportunities.
Nevertheless, the company's EPS fell short of analysts expectations, with a reported loss of 11 cents.
Looking ahead, experts are calling for revenue at QBTS to grow by 42.5% this fiscal year, with the full-year per-share loss projected to narrow by 42.3%.
Overall, analysts are optimistic about QBTS, giving it a consensus rating of "strong buy" and a mean price target of $3. That suggests expected upside potential of nearly 193%.
#3. Rigetti Computing
Founded in 2013, Rigetti Computing (RGTI) develops superconducting quantum processors and offers cloud-based quantum computing services, including its 9-qubit chip and Ankaa-2 system. The company provides quantum computing access, cloud integration, and support for quantum software. It also offers professional services in algorithm development and quantum application programming.
The company has massive room for long-term growth in quantum computing, with more than 165 patents in its portfolio. Additionally, it has built a strategic partnership with Oak Ridge National Laboratory to work to improve HPC-Quantum Integration.
Valued at $192 million, shares of RGTI have soared by 12.2% in 2024, slightly lagging the broader market. However, the shares are trading at an attractive valuation of 11x sales, which is reasonable given the company's growth projections.
On May 9, Rigetti posted strong Q1 results for this fiscal year. Revenue came in at $3.1 million, a 41% jump year over year. Additionally, the firm managed to reduce its net income loss by 11% from last year.
Turning to the balance sheet, the company's net cash flow improved by 137% year over year and, for the first time, hit a positive figure of $13.7 million. This shows its strengthened financial position and effective cash management.
Looking ahead, analysts expect RGTI's revenue to grow by 27% while its loss per share is projected to improve by 44% in fiscal year 2024.
Overall, analysts rate the stock as a "strong buy," based on 2 "strong buys and 1 "moderate buy." The average 12-month price target for RGTI is $3.17, which means the stock has 192% upside potential.
