2 Popular Quantum Computing Stocks to Sell Before They Fall 41% and 54%, According to Select Wall Street Analysts

Quantum computing stocks Rigetti Computing (RGTI) and D-Wave Quantum (QBTS) have experienced extraordinary gains exceeding 2,500% in the past year, yet Wall Street analysts are now flagging them as significantly overvalued. Rigetti, which reported a 42% Q2 revenue decline and trades at 1,253 times sales, faces a projected 54% downside to an $18 target price. Similarly, D-Wave, despite 42% Q2 revenue growth, trades at 384 times sales and is projected for a 41% downside to a $20 target, with analysts emphasizing extreme valuations despite the companies' differing approaches to quantum technology commercialization.

Analysis

Rigetti Computing (RGTI) and D-Wave Quantum (QBTS) have experienced extraordinary share price appreciation, advancing 2,570% and 2,840% respectively over the past year. However, Wall Street analysts, including Troy Jensen and Quinn Bolton, project significant downside, with Rigetti facing a 54% implied decline to an $18 target and D-Wave a 41% implied decline to a $20 target. This bearish outlook stems from concerns over extreme valuations following these substantial runs.

Rigetti's second-quarter financial results significantly missed expectations, with sales plummeting 42% to $1.8 million and the GAAP net loss tripling to $40 million. The company's gate-based quantum computing systems are noted to have limited commercial utility for at least five years, contributing to its exorbitant valuation of 1,253 times sales. Despite $425 million in cash, its current cash burn of $30 million year-to-date highlights operational challenges.

D-Wave Quantum reported mixed second-quarter results, with revenue increasing 42% to $3.1 billion but missing on the bottom line. While its annealing systems offer more immediate commercial utility for optimization problems, the stock trades at a still-elevated 384 times sales, which is twice as expensive as the S&P 500's most richly valued stock. The company maintains a stronger cash position of $819 million after recent stock issuance, offsetting its $35 million year-to-date cash consumption.

Both companies exhibit valuations that are detached from current financial performance and near-term commercial viability, particularly for Rigetti's gate-based systems. The significant cash reserves, bolstered by recent stock issuances, provide a liquidity runway but do not justify the current market capitalizations given the nascent stage of quantum computing commercialization and high cash burn rates.

Key Decisions for Investors

• Investors should exercise extreme caution given the consensus analyst view of significant overvaluation and the implied 41-54% downside for both RGTI and QBTS.
• Monitor cash burn rates and the pace of commercialization for both gate-based and annealing quantum systems, as current valuations appear detached from near-term revenue generation.
• Consider re-evaluating positions in these highly speculative quantum computing stocks, especially given their current price-to-sales multiples of 1,253x for Rigetti and 384x for D-Wave.