Don't Buy D-Wave Quantum Stock Until This Happens

D-Wave Quantum (NYSE: QBTS) calls itself "a leader in the development and delivery of quantum computing systems, software, and services." Investors seem to agree. Since the start of 2025, D-Wave stock has nearly tripled in value as investors bought into this stock's growth story... and overlooked its losses.

But here's the thing: As recently as mid-October, D-Wave stock was up by about 450% on the year. Since then, in just a little over seven weeks, it has lost more than 39% of its market capitalization. Could it be that investors are starting to lose faith in D-Wave Quantum stock?

And if so, are they right to do so?

Image source: Getty Images.

D-Wave's cash grab

Last month, D-Wave gave holders of its stock warrants an ultimatum: Exercise their warrants to buy shares of D-Wave for $11.50 each, or let the company redeem those warrants (i.e., buy them back) for just $0.01 per warrant, and lose the chance to buy D-Wave at a discount.

Unsurprisingly, about 95% of D-Wave's investors decided to ante up -- 4.7 million warrants were exercised in November, and 6.9 million shares of stock were created and sold for $11.50 apiece. This only diluted shareholders by about 2%, but raised $54.6 million for D-Wave, growing the company's cash hoard to about $850 million, net of debt.

At the company's current cash burn rate of about $55 million per year, this means it has enough cash to last it for the next 15 years.

That's a comfortable cash cushion. It's especially comforting because, according to S&P Global Market Intelligence, D-Wave is only about five years away from earning its first GAAP net profit and generating its first positive free cash flow. Both events are expected to happen in 2030.

Time to buy D-Wave?

I have to admit that, much as I dislike the idea of investing in unprofitable, cash-burning start-ups like D-Wave -- and I almost never do -- the math is intriguing.

If the analysts are right in their estimates, and D-Wave is on course to generate positive free cash flow 10 years before it hits a cash crunch, then there's every reason to believe this stock might eventually turn into a winner.

Sell quantum services, not quantum stock

And yet, one thing does worry me. If it's true that D-Wave is on course to become a successful, profitable quantum computing company, then why is it so eager to create and sell more stock, diluting its shareholders out of much of their future profit? Over the last four years, D-Wave has gone from barely 3 million shares outstanding to more than 350 million shares outstanding at last report. Admittedly, D-Wave raised a lot of cash along the way, but if the analysts' forecasts are right, it has actually raised substantially more cash than it needs.

Unless the analysts are wrong.

So what would it take to convince me to invest in D-Wave? Let's start with a modest goal: Achieve breakeven cash flow. Generate at least enough cash to maintain operations so that there will no longer be any need to issue and sell more shares to keep the company going.

Until D-Wave can do that, the stock remains a sell for me.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.